In the United Kingdom, the accounting authorities create an insinuation on each business to file up a Vat Return near or on the due date of a particular period. Basically, Vat is an acronym of (value-added tax) which is a consumption tax placed on the products at different stages of the supply chain, from production to the sale. The world of tax that applies to you and your business is incredibly important and yet often confusing. The most perplexing areas regarding taxes are the Vat Return.
Most business professionals and entrepreneurs know the importance of registering their business for Vat, however they seem little unclear about the exact guidelines, rules, and regulations. Talking about the two common types of registration includes compulsory registration and voluntary registration.
1. Compulsory Registration
As the name implies, in this type of registration the law enforces you to register your business for Vat Return. There is a point when the business’s taxable products and services value reaches a certain amount in a year; you have to register your business. In the UK, the amount is £70,000. Moreover, if you expect that you will reach this figure in the upcoming month, you are obliged to register by the state. On the other hand, you are not likely to register for Vat if your business doesn’t reach this point.
2. Voluntarily Registration
As you know that the business is not going to reach the prescribed figure, you even register your business and this is called voluntarily registration. In this case, the business invoices other Vat registered customers and hence can claim back the Vat charged on their purchases. Voluntarily registration improves your business profile. It shows other businesses that you have higher turnover than you typically have. Registering your business for Vat also opens up new opportunities for you from other businesses to work together on a higher level.
Here it is important to note that if you are running a small business and your only customers are the general public, you should not voluntarily register for Vat. The reason behind this is that the general public will not ask or claim you to return their amount, hence wait until the law enforces you.
Whether you should register your business or not is an important decision that should not be taken without consulting your financial advisors, business experts, and accountants. There are various accountancy and business consultancy firms in the UK, which are having accountancy professionals with a strong business background and in-depth knowledge. They have a good relationship with HMRC and can give you the knowledge to make the best decision for your company.
How to fill in Vat return?
Here are the few requirements;
- Flat rate scheme for small businesses
- Annual accounting
- Cash accounting
- Reverse charge accounting
- Margin schemes for second-hand commodities
- Payment on account
Guidelines to Fill the Vat Return
- You should fill in the boxes clearly with the use of black ink.
- On paper returns, write “none” and on online returns write “0.00”
- Don’t leave any box blank or put a dash.
- If there are no pence, write “00” in the box.
- You should not enter more than one amount in a box.
- You should use () to write the figures in the paper return.
- You should use minus sign on online returns if you have a negative amount in the box.
Once you register your business for Vat, you are required to submit a VAT Return every year. This may add more paperwork and filing obligations that will add workload, however, it will be beneficial for you in the long run.