Value Added Tax – whose responsibility?
Companies, sole traders, partnerships and owner-managed businesses are required to register with the HMRC for VAT when their turnover from their sales of goods or services exceeds £81,000 in the preceding 12 months.
For many owner-managed businesses, this is a thankless, arduous and unpaid tax-collecting task undertaken for the government — particularly arduous when the value of their own taxable inputs doesn’t equate with the administration burden.
It is however, a responsibility that cannot be ignored. We help our clients comply with VAT rulings, calculate output and inputs and submit quarterly returns.
VAT is tightly and vigorously regulated by HMRC which requires VAT registered businesses and organisations (including charities, clubs, institutes) to submit online quarterly returns reflecting output supplies (VAT on goods and services you have charged clients) and input supplies (VAT you have been charged on business purchases).
In some cases, we may recommend that a business registers for VAT before it reaches the £81,000 compulsory registration threshold because they can claim back VAT on the good and services they buy.
There are frequent changes to the VAT rules and regulations. No business wants to default in their VAT commitments, nor do they want to pay more than is required. But some of the details can be complex.
There are three rates of VAT — the standard 20 per cent on many services and goods, a reduced rate of 5 per cent on some goods and services such as energy costs, and the zero-rated on items such as fresh foods and children’s items.
VAT returns are normally completed quarterly and submitted online to HMRC within strict time deadlines. There are rules governing the information that must be included on tax invoices that require dates of supply and invoice, your registration number, you and your purchaser’s names and addresses, service items, total amount payable excluding VAT, total VAT payable and other details. There are a great many details and requirements that we’d be happy to talk you through.
We can minimise your VAT administration by undertaking the tasks, calculations and submissions. We can also advise you on VAT planning and registration, the various schemes available: flat rate, cash accounting, annual accounting, retail schemes.
Record keeping is a particular HMRC requirement. We can set up systems of record keeping for you, and train you or your staff in using them. VAT officers may request to inspect the records to ensure the correct VAT is paid.
There are severe surcharges and penalties for late registrations, returns and payments, and also for errors contained in the returns. If VAT returns are not submitted, HMRC can send you a VAT notice of assessment of tax — their estimation of what they are owed.
We also undertake a VAT health check on our clients’ systems, when required.