An Accountant for Tax Returns and VAT Returns

Demystifying a VAT Return – what businesses need to know about VAT

A VAT return is a fundamental part of running a business in the UK, affecting a broad spectrum of enterprises.

VAT is a tax that is added to some goods and services. Businesses registered for VAT are required to charge VAT on their taxable supplies (sales) and can also claim back the VAT they’ve paid on their business expenses (input tax). The difference between the VAT collected from customers and the VAT paid on expenses is reported in the VAT return.

Which businesses need to submit VAT Returns?

Most businesses in the UK must register for VAT if their taxable turnover exceeds the VAT threshold, so keep an eye on your turnover so that you know if you start to meet the requirement to register, or even deregister for VAT.

The threshold is calculated on a rolling 12-month period. As of July 2023, the registration threshold is set at £85000 of annual taxable turnover, but this may change in the future so please check latest regulations.

There is also the option for a business to register for VAT voluntarily, even if their turnover is below the threshold, as there may be advantages that VAT registration may offer the business, such as the ability to reclaim input tax.

What’s involved in submitting a return

The frequency of submitting VAT returns varies for each business.  Most businesses are on the Standard Scheme, which means they submit VAT returns quarterly.

However, some small businesses may qualify for the Annual Accounting Scheme, enabling them to submit one VAT return per year.

There is also the Flat Rate Scheme, which allows businesses to submit VAT returns quarterly but calculate their VAT liability differently.

Accurate and timely filing of each VAT return is essential to avoid penalties and interest charges.

Maintaining good financial records is key and an accountant can help with this, as is the ability to understand and keep up to date with all the VAT rules and rates that apply to your business and industry.

Different products and services have varying VAT rates, so understanding these distinctions is vital to avoid errors. If you are unsure about certain VAT rules, or are dealing with complex transactions, you may wish to consult with a bookkeeper or accountant for assistance. It’s also wise to regularly reconcile your financial accounts with your VAT records to ensure they match, to help identify discrepancies and prevent inaccuracies.

Accounting software can help automate VAT calculations and generate reports, to ease the process, but another way to make filing your VAT returns easier is to hire a bookkeeper.

As bookkeepers are professionals, with expertise in accounting and taxation, they have up-to-date knowledge of any tax changes to help you stay compliant. VAT returns can also be time-consuming, so outsourcing your VAT return to a bookkeeper can save you the time and hassle of trying to do it yourself.

If you’d like to know more about how Accounting Insight can help with your VAT liabilities, please just get in touch.