What is a VAT Return?
Value Added Tax or VAT is a tax that is charged by the government on services or goods that a business owner or a company buys. A VAT return is an overview of what you wanted when you sold something. VAT is a cost tax when you put a value on a product or service. When it is bought by people they are charged by this tax indirectly by the government. Businesses and companies put this tax charge on their goods and services and then they pay this collected tax to the HRMC (Her Majesty’s Revenue and Customs).
Understandably, when people buy products and services from a company they pay VAT returns, companies have to go through the same process when they buy services, materials, and stocks from others. However, Companies or businesses who have registered for VAT returns can claim back the VAT they have paid for their business expenses. Companies only have to pay the difference between the amount of VAT they have collected from sales and the amount of VAT they have paid for business expenses. If they have collected more VAT from their customers than the expenses, HRMC will pay them the difference.
A company or a business must register for VAT return when their annual income reaches the threshold of £85,000. Others can register voluntarily as well.
Advantages and disadvantages of VAT Return:
Some many companies and businesses have registered for VAT returns even when their annual income doesn’t reach the minimum threshold of £85,000. It is because there are many benefits of becoming a VAT Return Registered company or business.
The VAT is collected by the companies and businesses on behalf of the HMRC. HRMC pays them the difference between their collected VAT and the VAT they paid for their business expenses. You still have to pay the VAT if you purchase something from a VAT registered company and you won’t be able to reclaim anything because you are not VAT registered. Most of the non VAT return registered businesses and companies suffer in paying the actual tax.
It also makes your business look professional. Being VAT return registered does make your business look more reputed. That can attract more clients and customers towards your business.
Advantages of VAT Return:
- Most of the products and services are eligible for VAT
- You can reclaim the VAT for purchasing services and goods from other VAT registered companies
- Most likely, other companies won’t work with a non VAT registered businesses
- Maintaining your records for VAT Returns can be beneficial for business management
- You will be recognized as a bigger company since the minimum registration for VAT returns is £85,000, which is a big amount.
Disadvantages of VAT Return:
- Since you are registered with VAT Return you will appear as a 20% expensive company for other non registered businesses
- You have to invest some extra time in managing your VAT returns. You need to invest a little money for Bookkeeping (However, You can use the Bookkeeping throughout the year)
How to register for VAT Return?
As per the rules of the UK government, you have to get registered with VAT Returns when your company’s household reaches £85,000. However, if your turnover is lower than £85,000 you can also get registered voluntarily.
You can get registered in two ways, Online and Offline. Most businesses and companies prefer online registration because it is easy and requires less paperwork. However, there can be few situations where you can’t register online, you have to register by post. If you import products from other EU countries or you are selling goods and services in the UK from distance you have to go old fashioned to register. It will be better to hire a VAT Return Accountant if you choose to register offline.
Whether you choose to register online or offline, after submitting your VAT and other payments you will get your VAT Return certificate within 14 working days. You can get it from your online account or it will be delivered to you by post.
Deadlines of VAT returns:
In the UK you can pay your VAT returns monthly, quarterly, or annually depending on the financial situation of your business or company.
Annual VAT returns:
HMRC allows paying VAT returns annually when the taxable turnover of a company is £1.35 million. You have to pay in advance throughout the year. Only one return will be credited for a full 12 month period, this return may require a refund depending on a payment or payment made during the year in advance.
Deadlines: 2 months after the end of your accounting period.
Monthly VAT returns:
In the case of regular payment, monthly VAT returns can be requested by the taxpayer. HRMC can ask a business for monthly payments as well. These payments are advanced payments that are deducted from the overall quarterly payments when quarterly VAT returns are filed. It is mandatory to pay monthly payments when the taxable turnover reaches £2.3 million.
Deadlines: 1 calendar month and 7 days after the reported month ends
Quarterly VAT returns:
In the UK, quarterly times do not always follow the calendar quarters. When businesses and companies register for online VAT returns choose their quarterly periods.
Deadlines: 1 calendar month and 7 days after the reported quarter ends
Who is a VAT Return Accountant?
Managing your VAT returns as per the rules and regulations of HRMC, organizing all the paperwork and business reports, and in the end, submitting the VAT on time can be a very painful task for a business owner. Most of the business owners lack the resources, time, and knowledge to do their VAT returns correctly. One simple mistake can cost you penalties and time. Even the rules are complicated. Most of the VAT returns are paid quarterly. Few companies and business owners pay their VAT monthly and annually depending on the situation of their business.
A VAT Return Accountant will provide you services that include VAT reporting, minimizing the VAT liabilities, and creating strategies. VAT Return Accountants can be very crucial for many businesses. They are professionals with great attention level and communication skills. This can be beneficial for your complex VAT return situations. Also, a minor mistake in your VAT return can cost you a lot. So, it is better to hire a VAT Return Accountant.
Responsibilities of a VAT Return Accountant:
- Preparing and organizing your VAT return reports
- Submitting your VAT returns to the HRMC on time
- Dealing and managing HRMC on your behalf
- Tracking and recording all your VAT returns in your books
- Coming up with plans and strategies to reduce the VAT
- Keeping a good working relationship with the HRMC during audits and inquiries
- Securing all the details of your VAT transactions
How does a VAT Return Accountant help you from getting penalties?
Understanding the rules of VAT returns can be complicated. Just like other tax penalties it has its list of penalties. It depends on the situation of your previous VAT returns history whether you get a polite notice or fines.
A late VAT return is called ‘Default’. This table will help you to understand the surcharges and penalties of late VAT return payments:
|Default||Surcharge amount if the
Turnover is less than
|Surcharge amount if the
Turnover is over
|1st||No penalty||No penalty|
|2% if more than £400|
|3rd||2% if more than £400||2% if more than £400|
|4th||5% if more than £400||10% or £30 (whichever is greater)|
|5th||10% or £30 (whichever is greater)||15% or £30 (whichever is greater)|
|6th and more||15% or £30 (whichever is greater)||15% or £30 (whichever is greater)|
Most of the companies and business owners pay their VAT returns quarterly. So they pay every 4 months throughout the year. VAT returns are different than other tax returns. You have to pay your VAT returns for every product or service you purchase. That is a lot of things to manage. You won’t be able to focus on your business and VAT returns at the same time.
A VAT returns accountant will manage and prepare your VAT returns on your behalf. They will pay your returns following the rules of HMRC before the deadlines. They are experienced professionals with all the knowledge of HMRC laws. An Experienced VAT return Accountant will provide you advice and strategies to reclaim more VAT returns.
Why should you hire a VAT return accountant?
VAT returns accountants are experienced professionals with a good knowledge of tax and VAT returns rules. VAT accountants have exceptional attention to detail and communication skills. They will build a good working relationship between you and the HMRC. Using their experience they will advise you and give you the information in complex situations. They will also remind you of all the necessary dates for your VAT returns.
VAT returns are a complex tax matter, so most of the company and business owners rely on their VAT return accountants. It is important to handle VAT returns with extra care. A minor mistake can lead you to major problems. If you have any late penalties and surcharges, a VAT return accountant in this situation is a must to have. We highly recommend hiring a VAT return accountant for your business.
We are a UK based team of professional Tax and VAT return accountants. We will make sure that you reclaim all your VAT returns and pay your VAT without any mistakes. Our accountants are experienced in all the aspects of VAT returns. We will help you to manage your VAT returns and submit your VAT by following the rules of HMRC.