5 ways to stay on top of your quarterly VAT returns

Whether you’re a startup or an established business, if your taxable income for a consecutive 12-month period exceeds the VAT threshold (£85,000 for tax year from 2018/19) or if you expect to it exceed this threshold within the next 30 days, you must become registered for VAT.

The standard VAT scheme requires you to submit a VAT return and pay any liabilities on a quarterly basis. This may seem like a lot of work, but good housekeeping will ensure everything runs smoothly when your VAT return is due.

Here are a handful of smart tips from our VAT team that you will ensure you have the most efficient systems in place to deal with your quarterly VAT returns:

1. Understand how much VAT you should be charging

The standard rate of VAT that is added to most goods and services in the UK is 20%. However, not all items require VAT to be added. These items and services are classed as being exempt from VAT. The gov.uk website has an extensive list of VAT exempt goods and services, which include things like food and drink that are created for human consumption, sponsored charity events, health services that are provided by registered medical practitioners and funerals.

Additionally, certain goods and services require VAT to be added but a lower rate or zero rate. For example, energy-saving materials that will be permanently installed in a dwelling that will be used as a residential home, have VAT added at 5%.

If you’re VAT registered, it is important the rate of VAT you charge is applicable to the goods or services you provide.

2. Choose the right VAT scheme

There are various schemes in place that are designed to simplify the process of submitting VAT returns. The schemes that involve submitting quarterly returns include the Standard VAT accounting method, the Flat Rate Scheme (FRS) and the Cash Accounting Scheme.

Which scheme is best suited to you, depends on several factors, including the type of business you run, how much your taxable turnover is and the method you use to buy items that are needed for the business.

Our article ‘How do I know when VAT registration is required?’ discusses some of these schemes in further detail. Or, if you prefer, you can speak to a VAT consultant by calling us on 0845 880 5678.

3. File and store it

Your responsibility as a VAT registered business, includes:

• Keeping details of sales and purchases made by the company
• Keeping an accurate summary of the VAT on these sales and purchases.
• Issuing invoices with the correct level of VAT added

It’s imperative that you get into the habit of keeping accurate and organised records. HMRC require that you keep VAT records for a minimum of six years, or 10 years if you use the VAT MOSS scheme.

You can choose to store this information as paper records, electronically or through an accounting package. Whatever method you use, the information must be ‘accurate, readable and complete’.  This is important as HMRC can pay a visit to your business to inspect your records. If they find that your records are poorly kept they can issue you with a penalty charge.

4. Never forget when your return is due

HMRC want you to submit your quarterly returns on time. To make sure you never miss a VAT deadline again, sign-up to receive VAT email reminders from HMRC.

To sign up to receive email updates, login to your online account and follow the instructions next to ‘VAT messages’.

5. Pay on time, every time

Paying your VAT liabilities before the deadline will mean you never receive a penalty for late payment. The easiest way to do this is by setting up a Direct Debit. You can do this through your HMRC online account. Please note that you need to do this a minimum of three days before your VAT payment is due. Otherwise, the payment may not reach HMRC in time.

Once the Direct Debit has been set-up, payments will automatically be collected from your bank account three days after the payment deadline.

Registering for VAT may seem to be a daunting task but having a seamless system in place is key to prevent you from getting into a financial difficulties. If you are interested in having your VAT requirements managed by professionals, our VAT team would be happy to discuss your needs. Give us a call on 0845 880 5678 or email us on website@wrightvigar.co.uk.