By using this site, you agree that we may store and access cookies on your device. You can find out more and set your own preferences here.
If you own a business which turns over more than £85,000 per year, then you will need to ensure you are VAT registered. Managing VAT can be tricky and time consuming. Depending on the goods and services you sell and purchase, VAT is chargeable at three different rates - standard (20%), reduced (5%) and zero (0%) - while some items are VAT exempt.
In 2015 the government announced its plan to modernise the UK's tax system with the introduction of Making Tax Digital, which started on 1 April 2019. It is hoped that this new system will make it easier for individuals and businesses to keep on top of their tax affairs and ensure they are accurate.
For VAT registered businesses with a taxable turnover above the VAT registration threshold, you will be required to keep and send VAT returns using Making Tax Digital approved software.
There are advantages for managing your VAT data in this way, including increased accuracy and having a clear and concise overview of your tax liabilities in real time.
One simple way to ensure you have enough money put aside to pay your quarterly VAT bill is to keep the VAT paid to you for goods and services in a separate business bank account. For example, if income from your sales goes through your business current account, you might like to consider operating an easy access savings account alongside this so you can distribute any VAT paid on goods and services into it. This will help you to manage VAT funds more easily and ensure you have the funding readily available when it's time to pay your quarterly VAT bill.
Managing VAT isn't always straightforward, especially during uncertain times when cash flow isn't as strong as expected. Due to the coronavirus outbreak (COVID-19), the government has introduced a scheme to help companies manage their cash flow by allowing them to defer VAT payments until a later date. HMRC will not charge interest or penalties on any amount deferred, however, you must with comply with the rules and regulations in order to qualify. These include only deferring:
The scheme does not cover payments for VAT MOSS (Mini One Stop Shop scheme).
If you choose to utilise this scheme, you will still need to submit your VAT returns to HMRC on time. Following this, all payments owed will need to be paid on or before 31 March 2021.
Here at AMR we are experts at helping businesses of all sizes with their bookkeeping and payroll requirements, including VAT. If you have any questions or need professional bookkeeping advice, our friendly team will be happy to assist you. Get in touch and find out how our specialisations can help you and your business.