Business owners who have chosen to proceed with VAT record keeping in-house might feel lost when submitting VAT returns for the first time. Most frequently, questions related to VAT record keeping, VAT submission and deadlines emerge first. To help entrepreneurs who have found themselves in such a situation, 1StopVAT team has created a quick guide for getting started with VAT record keeping. In the article below, you will learn what information you should store, what VAT accounting period suits you best and what you should do in case of errors in your VAT returns.
Companies based in the UK with the turnover exceeding £85,000 must sign-up for Making Tax Digital scheme (MTD VAT), and other businesses can choose to enrol in this program voluntarily. This reason makes MTD the most popular way for VAT record keeping. A minority of companies choose to submit VAT returns as well as other information to HMRC by post and keep physical records of their transactions.
Under Making Tax Digital, companies must store all the relevant information about themselves and their sales digitally as well as submit VAT return online. The information kept digitally must include business and VAT registration details, VAT accounting schemes used, VAT on goods supplied and received, rates of VAT charged, as well as all information on transactions made on your behalf by a third party business.
Companies can choose to file VAT return declarations annually, quarterly and monthly. With annual returns, businesses make a final payment or receive a VAT return once a year. However, companies that receive significant and regular VAT rebates and use them to improve the cash-flow choose to submit quarterly or monthly VAT returns.
VAT return due date depends on the chose VAT accounting scheme as well, and every company owner can see the upcoming VAT return deadline using their HMRC VAT account.
When the deadline comes, companies in the MTD program should submit VAT return online entering their HMRC VAT accounts, using accounting software or hiring agents and accountants.
When submitting a VAT returns online, you will need to enter the values of output VAT, EC acquisitions VAT, total output VAT, input VAT, NET VAT due, total sales, total purchases, total EC sales and total EC purchases.
Once you submit VAT return, you must either pay or receive the VAT difference, as return submission deadline is the same as the payment deadline.
In case of errors, an online VAT return can be edited using the same system if the return has not been completed yet. If you spot inaccuracies after completing the return, you should amend the VAT details next time you submit a VAT return. A failure explaining to HMRC about the errors and amending the reports can result in financial penalties.
If you have accounted for VAT under a scheme that does not suit you anymore or have chosen to adjust your VAT accounting period, you can make these changes on your VAT account. After you have requested for changes, HMRC will contact you to inform you about the next steps and receive more details on your business case. It is very likely that after the amendments are implemented, you will have to edit your last return or submit a return for the previous two to four months.