Startups and entrepreneurs in the early stages of growing their companies simply can’t afford to be unaware of all the rules and tax laws imposed by HMRC.
You don’t want to cross the authorities, and one of the concepts that often get overlooked is value-added tax (VAT) and how VAT return works.
If your business is generating VAT taxable turnover of more than £85,000 a year, then it has to register for VAT and start charging appropriately.
A VAT return calculates how much VAT should be paid to, or reimbursed by HMRC. It needs to be submitted on either a monthly, quarterly or annual basis.
It looks at:
Basically, it’s worked out by:
VAT charged on your sales - VAT you can reclaim on business expenses = your VAT return
Even if there’s no VAT to pay or reclaim, VAT-registered businesses must submit VAT returns.
However, if your business isn’t VAT registered, you don’t have to submit a VAT return.
You may get a surprise visit by VAT officers, but HMRC would usually contact you seven days in advance to arrange the visit. The purpose of those inspections is to check your VAT records and make sure you’re paying or reclaiming the right amount of VAT.
The frequency of those checks depends on how complex your business is, and if you’ve submitted an incorrect or late VAT return in the past.
During its visit, HRMC will work with you to figure out if there are any problems, or if there’s any additional tax or penalty to pay. It’s a good idea to assist them as much as you can.
After the visit, HRMC will inform you about:
To make VAT returns and record keeping as painless as possible, why not join Mazuma and leave it to the professionals? We take the hassle away and make sure all the figures are correct. Phew.