“VAT returns”… The two words that have the ability to make a small business owner shrivel with dread. It’s one feature of creative business accounting that brings about confusion and panic before the process has even begun. After writing “how to prepare a VAT return” into Google, you will likely be met with a barrage of rules and regulations that could make even the keenest stickler’s head spin.
But once you know what you are doing, VAT returns really aren’t so bad. We promise. That’s why we are here to help trim the fat by providing a few golden nuggets of VAT return advice.
Tip One – Make Sure That You Complete Your VAT Return In Time
Let’s start with one of the most basic, but oh-so-important, pieces of VAT return advice. It is pretty darn vital that you ensure your VAT return is all sorted on time. Otherwise you could face penalties. And no one likes paying extra dosh for no reason, do they?
Typically speaking, this deadline falls one month and seven days after the end of the accounting period. This will typically fall at the end of each quarter. However, some companies opt for a monthly or annual structure instead. Bear in mind that this deadline also includes the time it takes for your VAT return to reach HMRC, so make sure it doesn’t fall too near the bottom of your to do list.
There are also differences in deadlines if you have opted for the Annual Accounting Scheme. This format sees businesses complete just one VAT return per year.
So set a calendar reminder, make it part of your quarterly routine or elicit the services of a small business VAT return-focused knocker-upper (see here if unfamiliar with the ridiculously niche reference). Or to make life easier, you could always ask for the help of a qualified accountant.
If you are in doubt as to when your personal deadline actually falls, you can always sign in to your account and double check online.
Tip Two – Look After Your VAT Receipts
Tip two is actually one of the key accountant mantras – keep a record of your receipts. No one wants to be that person rifling desperately through their purchase history in search of the rogue receipt from two months ago. By diligently looking after your VAT receipts, you are foolproofing yourself against such trivial issues.
Using a platform such as Xero, combined with DEXT, helps you keep track of your VAT records on the spot. Simply take a snap and it’s on record. That way, when it comes to filing your VAT return you will have all you need in one convenient place. Simple as that.
Tip Three – Keep Tabs On Your Credit Notes
Credit notes are issued when money that was initially due didn’t eventually make it from one party to the other. Essentially, if goods are returned or an invoice isn’t eventually paid then a credit note is provided to evidence that the VAT that has been paid is due back.
Think of it being like paying for your pick ‘n’ mix tub at the cinema only to realise that all the fizzy cola bottles aren’t in stock. (Yes, it’s the best flavour and no, we won’t be told otherwise). You’re not going to agree to paying for that empty tub, are you?
Let’s put this nugget of VAT return advice into a more business-focused context… Imagine you’re an ecommerce company that has sold a collection of its snazzy wears to a customer. You will have collected the money owed from said customer, including the VAT which you will subsequently forward onto HMRC. If that customer then returns what they purchased you will require a credit note to ensure that you get that VAT back from HMRC.
So, if you have any credit notes on the go, it’s pretty important that you don’t let them slip from your mind. Otherwise you’re paying VAT on something that effectively didn’t really happen. Not a situation that anyone wants for their company finances.
Tip Four – Be Aware Of International Payments
This one goes out to those of you that have gone global. Trading abroad is an exciting step for any business. However, it does come with a few extra reels of red tape to avoid and hoops to jump through. This also drips through into the VAT return process.
To be perfectly honest, we tried to write an effective and succinct paragraph or two on the rules and regulations before conceding that it is worth a post of its own. Such are the often mind-melting intricacies of overseas VAT. Until that blog post is released, ensure that you check supplier invoices from overseas very carefully for overseas VAT (which may be recoverable) and reverse charge.
For a more in-depth (and downright dense) insight into the VAT guidelines, check out this guide from HMRC. If you don’t fancy absorbing all this information, it is probably a good idea to get the help of a professional.
Still hungry for more? Our Founder and CEO, Jonathan Bareham, shares another simple tip for tax and VAT payments in this 60 second video:
Here at Raedan we can provide all the ins and outs required to navigate the wonderful world of VAT returns. Plus, we have extensive experience when it comes to helping companies find their feet and take the next step in their business journey. If you are interested in working with us so that you can focus on taking your business to the next step, get in touch here.