Do you have a new business and are struggling to figure out how to proceed with your VAT returns? Here at XPlus London Limited, we help our clients with VAT registration, VAT advice and penalty avoidance, penalty mitigation, and ensuring that small businesses do not miss out on VAT relief and opportunities by maximising them as much as possible. Our team of professional, dedicated accountants take the VAT return services we offer very seriously so that our customers can make the most out of what we offer.
Get in touch with our team today to discuss the services we offer and find out more about what we can do for you during the VAT period. Our team is ready and waiting to take your call!
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What is VAT?
The VAT, or Value Added Tax, is a tax that is added to the majority of goods and services sold by VAT-registered businesses. If an organisation’s VAT taxable revenue exceeds £85,000, the entity must register for VAT. They can also register even if their yearly income is less than £85,000. As a VAT-registered business, you must perform the following:
Include the proper amount of value-added tax (VAT) in every product and service price.
You must keep records of how much VAT you pay for items purchased for your firm and account for VAT on any products imported into the UK.
Report the amount of VAT charged to your customers and the amount of VAT paid to other companies by filing a VAT return to HM Revenue and Customs (HMRC) – normally once every three months pay any VAT you owe to HMRC Keep track of how much VAT you pay for items you buy for your business’s VAT account.
The VAT that you must pay is frequently determined as the difference between the VAT that you have paid to other businesses and the VAT that you have charged your customers.
If you collected more VAT from your consumers than you paid in, you must make up the difference with HMRC. If you have paid more in VAT than you have collected from clients, HMRC typically pays you the difference.
The Advantages of VAT Registered Businesses
Businesses who are registered to collect VAT add that tax to their customers’ bills and are eligible to get a refund on the tax they paid on purchases. If you are not registered for VAT, you are required to still pay the VAT on any transactions you make, but you will not be able to get your money back.
If your annual revenue is more than the threshold for VAT registration, which is presently set at £83,000, then you are required by law to register for VAT. This threshold is calculated based on a rolling 12-month period.
There are a lot of small firms that have a turnover that is lower than the threshold for VAT registration, but they nonetheless make the decision to voluntarily become VAT registered before they are legally required to register for VAT. This is because even if your annual revenue is smaller than the threshold for VAT registration, there are still a number of advantages to becoming VAT registered, including:
VAT Refund from Other Businesses
You have the ability to recover the VAT that other companies have charged you for the purchase of goods and services. This is especially helpful if the goods that your company has to acquire are purchased in larger quantities.
Increases Trusting Relationships
Because it is possible for your VAT number to be shown on invoices and websites, this can give the impression that your business is more desirable to potential customers and clients, making them more likely to choose you over a competitor.
Appear as a Larger Company Entity
Being VAT registered helps your firm seem larger and says your yearly turnover is more than £83,000. This might be advantageous when competing with firms that are not VAT registered, driving potential customers towards you and your services.
Are There Schemes For Me?
Depending on the individual circumstance of your company, there may be some schemes available to help with income, simplify VAT calculations, or make it easier to reclaim VAT where required. The method of calculating and accounting for VAT owed to HMRC by some firms that are registered for VAT can be made more straightforward thanks to VAT schemes.
They do not alter the amount of VAT that companies charge consumers for the goods and services they provide. Participation in them is completely optional. If you’re interested in any of these schemes, get in touch with XPlus London, where we can walk you through each one on a more individual level. To get a better idea of what these schemes offer, we have created a small list below!
Flat Rate Scheme
If you choose to adopt the Flat Rate Scheme, you will be required to charge VAT to your customers (referred to as “output VAT”) and will continue to pay VAT to your suppliers in the traditional manner when you acquire products or services from them (referred to as “input VAT”).
On the other hand, the process of producing your VAT return and making payments to HMRC are carried out in a somewhat different manner. You don’t tally up all of the value-added tax (VAT) that you charge consumers and then subtract the value-added tax that you are eligible to recoup; rather, you tally up all of your sales, which includes any VAT that you paid to your clients, and then you pay HMRC a percentage of those sales. Unless you are considered a restricted cost trader, the proportion that you pay depends on the trade that your company engages in.
Cash Accounting Scheme
The Cash Accounting VAT Scheme is a VAT reporting technique in which VAT is reported based on payments made or received. The VAT Cash Accounting Scheme adheres to cash accounting principles, which means that revenue is recorded when it is received and costs are recorded when they are paid.
As a result, the Cash Accounting VAT Scheme differs from the Standard VAT Accounting Scheme, which records VAT on the date of sending or receiving a VAT invoice, regardless of when (or whether) payment is received. When you join the Cash Accounting VAT Scheme, you do not need to notify HMRC, unlike when you join the Flat Rate VAT Scheme. You must, however, join at the start of a new VAT accounting period. Similarly, you must quit the plan at the conclusion of the accounting period and pay any owing VAT within six months.
Annual Accounting Scheme
The annual accounting plan is beneficial to small firms because it enables them to reduce the number of VAT returns they have to file from the standard four to just one each year. They make payments during the year that are based on a projected obligation for the year, and then they have to make the final payment when they file their return. The programme is designed to facilitate budgeting and cash flow while also reducing the amount of documentation required.
If a company believes that its taxable sales for the upcoming year will be less than $1.35 million, then it is eligible to submit an application to participate in the programme. Businesses are required to have their VAT returns up to date and are not allowed to register as a group of companies.
Get in touch with XPlus London Limited today for more information!
If you would like to know more, or you’re looking for a professional accounting service to provide VAT return services so you can avoid paying HMRC a hefty penalty, make sure you get in touch with our team at XPlus London Limited today!
A member of our team will be on hand to answer questions, offer advice, and arrange a consultation with our team, so don’t delay! We’re only a phone call away and can’t wait to hear from you!