VAT REGISTRATION – WHO MUST BE VAT REGISTERED?
Whether you are a sole trader, partnership, or a limited company if your business has a taxable turnover exceeding the VAT threshold of £85,000 you are required by law to register for VAT and file returns with HMRC.
Some businesses choose to register for VAT voluntarily even if they do not exceed the threshold because it is in their best interest to do so.
- Must charge VAT on their goods or services,
- May reclaim any VAT they have paid on business-related goods or services,
- Must keep accurate VAT records,
- Must report to HMRC the amount of VAT charged and paid via a VAT Return, which is usually due every 3 months (standard scheme)
Here at Harvest Accountants, we can take care of your VAT registration with HMRC and ensure your business is correctly set up to file quarterly VAT returns in the correct digital format.
SUBMITTING A VAT RETURN
If you are VAT registered, you will have to complete online VAT returns to HMRC every 3 months under the standard VAT scheme. You will also have to make any payments due by the deadline date each quarter.
The VAT Return records:
- Your total sales and purchases
- The amount of VAT you owe (VAT charged)
- The amount of VAT you can reclaim (VAT Paid)
- What your VAT refund from HMRC is (if a refund is due)
You MUST submit a VAT Return even if you have no VAT to pay or reclaim. Failure to do so will usually result in a penalty fine and interest.
When filing your VAT return online you must also be compliant with the Making Tax Digital requirements.
Here at Harvest Accountants, we can assist your business with their VAT returns. We use digital software for all our clients to file VAT returns ensuring compliance with the Making Tax Digital requirements.
MAKING TAX DIGITAL COMPLIANCE
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. Digital VAT filing will be compulsory, so your business must the correct accounting software in place which is compliant with the Making Tax Digital regulations.
Harvest Accountants are partners and certified advisory with many leading accounting software providers and we can ensure you are set up for digital VAT filing.
OTHER VAT SCHEMES
In addition to the standard VAT scheme mentioned above there are also other VAT schemes:
Annual accounting VAT scheme
Instead of filing your VAT return every 3-months under the standard scheme, you have an annual VAT reporting and payment deadline. Once you complete the VAT return, you then make quarterly interim payments based on the estimated VAT you will owe. You may end up over-paying or under-paying HMRC at times, so you may be required to make a final balance payment or apply for a refund. This scheme is not available for businesses with an annual turnover above £1.35 million.
Flat rate scheme
Under the flat rate scheme, you simply pay a percentage of your total turnover as VAT. The actual amount you pay depends on the type of business you run, the VAT flat rates differ from industry to industry.
Like the other schemes, you still have to charge VAT on your invoices, but you don’t have to account for the VAT details of every purchase or sale. This scheme is only available to smaller businesses, with annual turnover up to £150,000.
Cash accounting scheme
With cash accounting, you account for VAT on the date you’re paid as opposed to the date you send the invoice. This can be especially helpful if you have slow payers since you won’t have to pay the VAT before you’ve been paid.
However, this scheme isn’t well suited to businesses that buy a lot of items on credit. You can’t reclaim the VAT until payment has been made to the supplier. As with the standard VAT accounting method, you still have to complete your returns every quarter. Businesses with an annual turnover above £1.35 million can’t use the annual accounting scheme.