The tax paid on all supplies made in the UK by taxable people is known as Value Added Tax (VAT). If you run a business that is registered to submit VAT returns, then you are supposed to make your submissions to the HMRC on a quarterly basis. To ensure that you don’t fail to submit your returns, the HMRC provides you with a VAT return which you must fill and submit within 30 days after the end of the respective quarter. The actual deadline date the will be indicated on the return and in case you fail to meet it, then you are subject to heavy penalties.
VAT returns can be paid either by an individual, a limited company or a partnership as long as one is registered to pay the returns. The VAT paid to the HMRC is calculated by getting the net difference of the VAT paid by customers at a current rate of 20%.
How to get your estimate VAT returns
VAT tax law allows you to submit estimated tax returns as long as you provide a robust reason why you want to submit estimate output or input tax. Some of the reasons that may prompt you to submit estimate VAT returns include;
- Change of staff
- Changing into a new accounting software
- Getting third-party data later than you had expected
whatever the reason you give, the HMRC allows you to provide adjustments at a later date in which they are very explicit that you must provide the correct information on the following returns. For you to be allowed to submit estimate values, you must make a request via writing stating your reasons.
Exemption and partial exemption VAT supplies
There are some good and services that are exempt from all VAT while other have partial exemptions. If you offer such supplies, then there is a big impact on how much VAT you can reclaim on all your purchases. In case all your goods and services are exempt, then you won’t be able to register for VAT in which case you cannot reclaim VAT on any purchases or expenses spent on your business. Your business is classified as partially exempt if you are registered for VAT and you obtain VAT on all goods that are used to make exempt supplies.
Examples of VAT-exempt goods and services
- Any charitable fundraising event
- Finance, insurance, and credit
- Membership registration of any organization
- Education and training services
- Letting, leasing, and selling f any commercial land building
Since the above supplies are exempt of all VAT, they are not taxable. Therefore, when submitting your VAT taxable turnover, you do not include sales on either of these goods and services. Also, if you buy any of these goods or services, you have no VAT to reclaim. It is important to note there are some supplies that are zero-rated. Just like exempt supplies, zero-rated supplies don’t add VAT to the selling price but the latter are VAT taxable at 0% rate.
What are partly exempt businesses?
If you receive VAT on the purchase of supplies that that VAT exempts, then your business is considered partly exempt. In this case, the tax is referred to as exempt input tax. You cannot reclaim exempt input tax but there are cases where you can recover it in full if it is below a certain amount.
If you purchase supplies that VAT exempt but use them for personal purposes and not for business, then you cannot reclaim VAT. In case you purchase such supplies and use part of them on business and the rest for personal purposes, then you have to distribute the VAT accordingly. To know how much of business VAT you need to reclaim, you can use the partial exemption method. Also, if you are running a partial exempt business, always remember to keep a separate detailed record of all exempt sales, how you worked out, and how much you need to reclaim.
How to submit HMRC VAT return form
The tax law requires that all businesses submit their HMRC VAT return form online and make all payments electronically. However, there are a few exemptions in which you can discuss alternatives to submit your returns to the HMRC. These instances include;
- Your business is entirely comprised of members of a certain religious group whose beliefs forbid the use of computers.
- You are not in a position to use a computer due to reasons such as age, disability, or living in a remote area.
- If you are subject to insolvency proceedings. However, you can still submit online if you have an approved voluntary arrangement.
- Benefits of submitting your VAT returns online
- It is the most secure and safest ways to send your VAT returns
- You get an instant onscreen message that the HMRC has received your returns
- If you have many responsibilities to take care of, you have the option to set on a reminder to alert you when your returns are due
- Unlike returns paid by check or paper returns, submitting your VAT return gives you an extra seven days to make your submissions. In case you pay using Direct Debit online, you have an opportunity to get extra 10 days to submit the due date
- If you want to submit VAT return online, there are certain conditions that you should be aware of. These include;
i) You may use the online service if you want
- Get a notification to register for VAT
- Notification to deregister for the service
- Want to give a notification about making changes on your VAT registration details
- Make a notification that you want to apply for exemption VAT because you only get zero-rated supplies
- You want to make voluntary registration or deregistration of VAT
- Want to change your VAT registration details without necessarily giving a notification
- Want to make a request to have your VAT registration number transferred
ii) You can only use the VAT return online portal if you have a Government Gateway account. In case you don’t have an account, you will be provided with one upon registration for VAT returns. However, there are instances that the HMRC can deny you access to the online services and especially if they are trying to protect the revenue.
iii) The following personnel are prohibited from using the online portal;
- People or organizations that require Government registration numbers
- Anyone applying or notifying supplies from another EU member
- Those notifying disposal of assets whose VAT repayment has been reclaimed
What does a VAT return include?
A VAT return usually includes the following;
- Total sales and purchases of a business during the reported period
- The total amount of VAT owed to HMRC.
- Total amount of VAT which a business can reclaim
- What the net refundable or payable amount is
- Late returns can attract default surcharge
Understanding bad debt relief
You are in bad debt if you have supplied goods and services to a customer but have not been paid yet. If you have met all the VAT requirements, then you are eligible for a bad debt relief. You can claim the relief whether the debt owed to you is in form of money or other goods in case you did a barter trade. In most cases, bad debt is more likely to affect people who invest in peer to peer loans via lending platforms that are approved by the financial conduct authority.
How to claim you’re bad debt relief
For you to reclaim your debt, you must have met some met conditions which include;
- The VAT on the supplies offered on debt must be accounted for and you must have paid the HMRC
- You must not have sold the debt
- You must have charged the expected price for the supply and not more than
Sometimes it is not easy to know whether you should reclaim your VAT debt relief or not. In that case, you are supposed to talk to a professional and WeAccountax will be more than happy to offer you assistance. Our professional accountants will always remind you of your VAT deadline, help you with filing without making any errors on the digits, and also ensure that your returns are filed in a timely manner.
The process of reclaiming your VAT debt relief
Once you give us the responsibility of handling your tax returns, we are going to go through your accounting books paying a close attention to ensure that all VAT paid on your business expenses has been reclaimed. We also take it as our responsibility to ensure that you pay as little tax to the HMRC as possible. Of course, we do this by using all legal ways to avoid getting you into trouble with the tax guys.
Prior filing your VAT returns, we always ensure we go through the records and also hand them to you for confirmation before we can forward them. This thorough h confirmation eliminates chances where you are accused of filing wrong tax figures to the HMRC.
We handle all return filing and we have had the pleasure of serving many satisfied clients in the UK. This comes with a benefit that all your returns are filed in a timely manner and you will never have to worry about missing deadlines. Note that missing VAT returns deadline can subject you to paying a fine, which is an extra cost to your business. We offer the best VAT return online and that is how we have managed to build our reputation among many small business owners in the UK.
Preparing for a VAT inspection
When running a limited company, you should expect regular visits from the HMRC which occurs in a span of four to six years. Many people dread the inspection but the truth is, they are standard routines and there is nothing to worry about unless you have engaged in serious VAT fraud within your business. If you are working with a professional accountant such as WeAccountax, then there are minimal chances that you will get in trouble with the HMRC.
The reason why the government sends an official to your business is that the moment you registered for the VAT returns, you took the responsibility to receive and account for the government value-added tax and it only fair for an official to come and confirm that you are keeping your word. WeAccountax will help you file your VAT returns such that you are keeping your words.
The inspection doesn’t happen as a surprise but instead, you are given a call by your local HMRC office notifying you that your company has been selected for inspection. You agree on the most appropriate date which is within 30days. Upon agreement, the HMRC office will send you a letter stating the agreed date and the time the inspection will take place, and the name of the officer who will perform the inspection.
The letter will also give instructions on the documents that you are supposed to keep ready. These documents should date back at least three years ago or to the last time, you have your limited company inspected. The most important documents for the exercise include;
- Your VAT account and other related paperwork
- Annual accounts
- Your accounting books including petty cashbook, daily purchase and sales books, cashbook, and all accounts
- All sales and purchase invoices
- Supporting documents for practices such as contracts and correspondence
- All your bank statements
- Your VAT registration details and the certificate
When the date comes, the inspecting officer prefers to meet you in your business address in which case the director must be present during the exercise. However, if you are dealing with a freelance accountant, the meeting can take place in the accountant’s office in which case you and your accountant must be present.
Once the meeting commences, you are expected to give a brief introduction of your company like when it started, the type of activities it deals with, total turnover, and the type of records you keep. After that, you are supposed to provide the inspector with your company records and he will spend at least two hours going through everything.
After checking the records, the inspector will give the finding and advise you in case he finds any errors in your records. He can also give you tips on the best accounting procedures that will help you minimize errors. Following these procedures may at times result in your business getting a refund from the HMRC. A few days after the inspection, the HMRC department will send you a letter detailing all the adjustments you are supposed to make your records. Those adjustments are supposed to be made in the next VAT return filing.