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Preparing For A VAT Return: The Basics

The words Vat Return can frighten even the most experienced business owners but even more so the start up business owner, new to the world of finance and the legal requirements their business faces. Many prepare their own VAT returns whilst others often prefer to seek the support of a specialist accountant in order to avoid any risk. Whichever route you opt for- ensure you are aware of the basics, the requirements and the rules and regulations you face, in order to keep your business safe at all times.

 A VAT return refers to value added tax- the tax that is levied on the sales of goods and purchases. Registered businesses can usually reclaim the VAT that they have paid on said goods and services however there is a threshold. Currently, businesses with a turnover of £100,000 and over are required to complete a VAT return so for many small businesses this may, as of yet not apply.

The team at Calculated Accountants have put together a few basic points that can help start up and small business owners get a better understanding of just what a VAT return is and what it can mean for a business...

  • Businesses must register for VAT once sales pass the set threshold- voluntary registration is possible and often deemed beneficial however it is important to discuss this with your chosen accountant. 
  • It is commonly agreed that a VAT return can add credibility to a business- as companies prefer to purchase products or services that they can reclaim VAT on.
  • Registration can take a few months however you do not have to wait until your certificate arrives, to begin charging VAT.
  • A VAT return must be completed every quarter to HMRC and include all details on the VAT your company has charged for products and services, this is referred to as output tax.
  • Companies can include the VAT they have paid on supplies, equipment and stock; this is referred to as input tax and may also be reclaimed.
  • All VAT records must be clearly and accurately maintained.
  • HMRC will use your completed return to calculate the difference between output and input tax and if a business has paid more VAT than it has received; then it may be entitled to a reimbursement. However if a business has charged more VAT than it has paid than they will be required to pay the difference to HMRC.

The above are a few basic points and whether you are new to VAT, have just passed the turnover threshold or are considering voluntary registration; understanding the basics can ensure you are as well prepared as possible.

For a more in-depth insight into VAT, why not speak to one of our team members today?

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