How good VAT records can save your business £000’s
No sane person enjoys VAT right? Sorry VAT experts. As soon as we see VAT, the tendency is for people to switch off or stop reading.
Keeping good VAT records and understanding your responsibilities as a business owner can save your business £000’s. More interested now?
The first point to be aware of, is when a business is required to register for VAT, or when they should consider voluntarily registering.
The VAT taxable turnover is currently £85,000 (2021/22), but businesses can register voluntarily if under this level – there are instances where this would be beneficial.
When registering, you have a number of responsibilities, including advising your customers, updating your bookkeeping software and being aware of VAT deadlines.
One key point to note is that there is a time limit for backdating claims for VAT paid before registration. This is often overlooked by businesses and results in them missing out on substantial VAT claims.
When registering for VAT, you can choose to submit returns either monthly or quarterly.
The decision on whether to submit monthly or quarterly will affect your cashflow and the frequency with which returns are required.
The deadline for submission of a VAT return is 1 month and 7 days following the end of the previous VAT period.
Penalties can be levied if you do not submit VAT returns on time or make full payment of VAT owed to HMRC by the deadline date.
These penalties can be significant, especially for repeat offences.
HMRC can, and frequently do, query VAT returns.
This can be triggered for a variety of reasons, but it is essential that you keep good VAT records to ensure that you can answer any questions in a timely manner.
A delay in responding could result in a large repayment not being returned to you and fines (or worse) if you are found to be missing information.
Ensuring VAT details are entered correctly into your bookkeeping software is key in claiming and paying the correct VAT.
Accidently coding an invoice incorrectly, or not obtaining an invoice, can and does result in businesses missing out on significant amounts of VAT.
With new technology, tools such as Dext Precision can be used by your bookkeeper/accountant to check whether there are invoices that may be missing VAT or have had the incorrect rate applied.
It sounds boring, but it will save your business money at some point.