How Can An Accountant Help with VAT?
A qualified accountant can help with:
- VAT Registration
- VAT Returns
- HMRC Compliance for your business
- Audits and Investigations
An online accountant can act as an officially registered Agent on your behalf, providing everything you need for each stage of the VAT process, from registration to returns to rectifying any issues. They will also provide you with software which can automatically work out what you owe based on your transactions, as well as:
- VAT Registration: Accountants can check you are eligible for registration, obtain the forms with your VAT Number on, and ensure all of your details are correct and ready for submission. An accountant can also monitor your situation and suggest whether you can de-register at any point
- VAT Returns: From checking your bookkeeping for any inaccuracies to calculating turnover and filling out the online forms/sending them directly to HMRC. They can also give VAT scheme recommendations based on your customer and supplier payment habits, for instance, if payments are regularly delayed. Your due date will depend on when you registered
- Correct Payments: Not only do you want to be paying as little as possible to HMRC in VAT, but you will also be wanting to claim back as much as possible. Accountants spot any claims you may have missed, for instance, on obscure items or transactions, and categorise them for you
- Timekeeping: If quarterly VAT payments are not filed before a certain date, then fines and penalties can be ordered. There may be added interest, which isn’t good for your finances. An accountant can ensure everything is submitted correctly and in plenty of time, and you can also use software to check dates
- Investigations: An accountant can act on your behalf if HMRC needs to investigate your claims. This can be at random, because figures you have submitted to them do not look correct, or if you are in an industry with particularly complicated returns or a high level of inaccuracy. If you have appointed an accountant, then there is little risk of things being wrong
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What is ‘Value Added Tax’?
VAT, or Value Added Tax, is a form of consumption tax applied to certain goods and services. For the government, it is their third biggest source of income. For businesses, it plays an important role in the finances of the company and can fluctuate depending on how many taxable services you offer.
It is ultimately paid by the consumer, so is not a charge on individual businesses but rather an indirect charge through businesses. You are just ‘looking after’ this money until it is declared in your tax return forms.
You have to register for VAT if your income is over the current threshold, by completing and submitting a return to HM Revenue and Customs (HMRC), which is usually done every three months. You must inform HMRC of the amount of VAT you’ve charged and the amount of VAT you’ve paid.
Any company registered must charge VAT on their services, and also may reclaim any VAT they’ve paid on business-related goods or services each quarter.
Some services which may be applicable for VAT payments for businesses include:
- Sales of goods and services
- Hire and loan of any goods
- Items sold to staff (i.e. canteen meals)
- Personal use of business goods
- Exchanges, gifts and part-exchanges/returns
- Receiving goods and services rather than money
Charities have different rules regarding their tax payments and therefore operate slightly differently. There are also some exemptions from paying VAT, such as if you offer some of the following:
- Education and training
- Fundraising for charity
- Insurance and financial services
- Selling or letting commercial property
- Postage stamps
- Betting and bingo services (games of chance)
You may be able to reclaim some of the VAT on things such as:
- Staff travel
- Vehicles used for company business only
- Costs of running said vehicles (fuel/servicing etc.)
- Mobile service plans used for business needs
What is the 2019 VAT Threshold?
For 2018/19, if your annual business turnover is over £85,000, you are legally required to register for Value Added Tax.
It is only when you are registered and have your VAT Number that you can start charging.
What is the 2019 VAT Rate?
These are the percentages you need to add on to the base rate cost of your goods and services for 2018/19:
- Standard Rate – 20%. The majority of goods and services
- Reduced Rate – 5%. Select goods and services, e.g. power bills, energy saving materials, mobility aids for the elderly
- Zero Rate – 0%. Zero-rated goods and services, e.g. children’s clothes, some basic food and drink for human consumption, charity advertisements
- The zero rate is different from being entirely exempt, as the services still have to be declared in a VAT return, but a company can reclaim the VAT back.
Even if you haven’t taken into account the extra VAT costs in terms of the price you charge, the price of your services will be seen as being inclusive of VAT, even if you’re then working at a loss.
Taking time to go through all of your bookkeeping, accounts and expenses can take away from the time you put into your business. Using online accounting can help calculate everything automatically, and submission will be easy and in line with Making Tax Digital guidelines.
Having an accountant to hand means they will always be there for unlimited advice or help if needed. And you will no longer have to wonder when your VAT returns are due, either.
Can I Register Voluntarily?
Yes. Some companies like to be VAT registered as it makes things a bit more ‘official’, or allows them to claim back any they’ve paid to registered companies.
Should your turnover be under the threshold, you can still register for VAT, but you will be bound by certain responsibilities. You must still offer your products at a price which includes the correct rate of VAT, submit returns and keep records of everything you sell.
Businesses voluntarily registering often opt for the ‘Flat Rate Scheme‘. We can advise our clients on whether the Flat Rate scheme is right for them, as there are some differences between the FRS and regular registration.