Use These 5 Good VAT Tips
Many business owners handle preparing VAT returns on their own. This is something that can eat up tons of time, which they’d honestly prefer using for anything else. This is why it’s crucial that you be sure to thoroughly claim back all that you are able to while also simultaneously minimizing the possibility for errors. The following are 5 good VAT tips you can use for an improved tax position:
1) Be Sure To Claim VAT For Mileage:
A lot of business owners, particularly ones owning limited companies, typically claim mileage so that they can cover expenses related to business vehicles. This is usually done at rates of either 20 or 45 pence per mile. VATIT says it’s also possible to claim some VAT back for the fuel component of these very same mileage claims. The fuel component is calculated per the advisory fuel rates of HM Revenue & Customs. Locate the appropriate fuel rate for each mile before you multiply it by the specific number of miles traveled. Then, you can apply a VAT fraction of 1/6 so you know how much you’re able to claim back.
2) Let Us Assist You In Picking The Best VAT Scheme For Your Business:
Your business might be able to take advantage of several different VAT schemes. For instance, based on the appropriate industry sector, it’s possible that you could benefit from being on a flat-rate VAT profile. Using the flat-rate scheme, your VAT would simply get calculated as a basic percentage of all your gross sales. For instance, a catering business would wind up at 12.5 percent. On top of being easier to figure out, you might also wind up paying HM Revenue & Customs less since this particular VAT calculation might wind up being less than you’d get stuck with under the standard model.
3) Get VAT Back From Bad Debts:
When you have a customer debt that has been outstanding for longer than half a year and payment is not likely to happen, then you can reclaim the VAT sales that you already paid for those transactions to HMRC. It’s crucial to conduct regular reviews of those who still owe you money. One method of preventing the need for reclaiming bad debt VAT is using the VAT cash-accounting scheme in particular. In this scenario, you don’t include VAT from sales on any of your VAT returns before the customers have actually paid you. This also applies to VAT from purchases until you also pay for them too.
4) Maintain A Distinct Bank Account For VAT:
VAT is basically a tax which business owners must collect for the HMRC. It’s crucial to manage all of your cash flow properly, but it’s quite easy to fall for mistakenly spending your VAT like it is working capital of your own. This would result in cash being unavailable when your quarterly HMRC payment is suddenly due. Prevent this by using a separate bank account where you can park your monthly VAT. This will help you avoid nasty surprises when you get to the end of a quarter.
5) Utilize Great Software:
Minimize the odds of errors through the use of simple accounting software. Great accounting software records the invoices that get included for a certain VAT return. This will eliminate risks of VAT getting double-declared or VAT on any invoices received late not getting claimed at all. Cloud-based software makes it simpler for an accountant to review VAT returns before you file. If you’re curious, we can help you figure out whether FreeAgent, Kashflow, or Xero might work for your company.