VAT is something that seems hard to understand but you just need to know some basic things about it. The term VAT stands for value-added tax. All the governments add this as an official business tax for all the sale of the country’s goods and services.
Basics of VAT
All legal businesses have to register with the VAT. After completing the registration, you need to start charging VAT according to the government requirements on all the products and services you sell. That also means you have to pay for the VAT if your business is purchasing goods and services. Moreover, you have to charge the value-added tax on the complete sale price.
What about the VAT Returns?
As a business owner of an established firm, you have to file VAT returns in Bromley. The returns are filed to the HMRC (HM Revenue and Customs). So, basically the VAT that you charge for on your goods and services plus the VAT that you pay are roughly the same amount. The difference that arises, if there is any, is resolved when you are filing the VAT tax returns. You would either be liable to pay an amount to HMRC if the numbers indicate it. Or you may receive a refund for an amount the HMRC owes you.
What You Should Know About VAT
Your business needs to register for the VAT if the turnover for the past twelve months are surpassing the given threshold. Moreover, you need to know that the VAT amount is added separately in the financial records. Another thing you should know is there are different rates when it comes to the value-added tax. You should research and see whether your business falls under the category of giving VAT or not. For instance, educational services and antiques are exempt from it. To learn more about particular rules about this tax you should consult accountancy firms offering Corporate tax & planning in Bromley.
Schemes to Make VAT Filing Easier
There are three major schemes you could follow to make the whole VAT process easier:
1) Flat rate VAT scheme:
This is applicable to businesses who have a turnover for less than £150,000. With this, you don’t need to keep records of VAT on each item you buy or sell. You would be able to calculate the tax as a percentage of the total VAT-inclusive turnover. Ultimately, this makes filing for returns easier.
2) Cash Accounting Scheme:
This applies to those businesses with a turnover of the coming year is expected to be not more than £1.35 million. Using this means you must pay the HMRC that tax you added on all your sales even if the customers haven’t paid you. That means you can reclaim VAT only after paying your suppliers.
3) Annual Accounting Scheme:
The same condition of the cash accounting scheme applies here as well. The turnover must not exceed £1.35 million. With this, you are able to make 9 monthly or 3 quarterly interim payments per year. You only have to complete the return once by the end of the year this way.