VAT Tips For Small Businesses

vat for small scale businesses

Are you a small business owner? Here are several tips that could help you stay on top of your VAT responsibilities from choosing the right VAT scheme, to ensure that you don’t get on the wrong side of Her Majesty’s Revenue and Customs.

It is important to understand the differences when reclaiming VAT from different countries. For example Poland VAT laws are different to those in Spain. If in doubt it is always best to check.

For more on how to compute your VAT liabilities, visit Her Majesty’s Revenue and Customs site by clicking here.


Top VAT Tips for Your Consideration


  1. Contact HMRC


You can get in touch with Her Majesty’s Revenue and Customs Value-Added Tax helpline on 0845-010-9000 (call between 8 am and 6 pm), or visit their website.


  1. Registering for Value-Added Tax


If you run a small business, knowing when you need to register it for VAT is essential. As per the law, you should register your business if your turnover hits the 77,000 sterling poundsmark within 12 months. Nevertheless, you can still voluntarily register your business even if your gross revenue hasn’t yet hit the mark.


  1. Choose the Right VAT Scheme


Besides the standard value-added tax scheme, you could also profit from taking on the Flat Rate Scheme. This scheme was intended to simplify VAT bookkeeping for small enterprises. Other types of schemes include the Cash Accounting scheme (under this scheme, you only pay back value-added tax to Her Majesty’s Revenue and Customs once your customers have paid you), and the annual accounting scheme.


  1. Impact on Customers


Once you register for Value-Added Tax, make sure that you include VAT on the costs of all the services and products you have to provide. This’ll not only have an impact on your pricing; it will also have an impact on non-VAT registered customers that you may have as they cannot reclaim VAT costs on their own.


  1. Bookkeeping


It essential that you keep precise and regularly-updated Value-Added Tax records; that is if you want to handle your tax returns with ease. Make sure that all your invoices, receipts and related documents are stored in one location for easier access.


  1. Keep your BusinessVAT Safe


Ensure that all the VAT liabilities you amass on Her Majesty’s Revenue and Customsbehalf is stored in a secure place – preferably in a separate bank account together with other taxes that you will be required to pay shortly such as Corporation Tax that is if you run a limited company.


  1. Value-Added Tax Online


Since 2012 (April), practically all businesses are required by the HMRC to submit their returns online after every quarter.


  1. Direct Debit


Since 2012 (April), all Value-Added Tax liabilities payments have to be paid electronically. It is, therefore advisable that you consider creating a direct-debit with Her Majesty’s Revenue and Customs, who’ll automatically deduct whatever you owe them from your company’s business account.


  1. Value-Added Tax Penalties


Try and avoid being late with your Value-Added Tax returns and payments. While there’s no surcharge for the first late submission, the amount charged on VAT obligations you owe will continue to grow in accordance with how often you are late with payments.


  1. In Doubt


If you have any doubts concerning your VAT responsibilities, contact Her Majesty’s Revenue and Customs or a professional VAT advisor such as an accountant for help and advice.

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