There are a lot of business owners who complete their own VAT returns. This can take a lot of time which could be spent on other aspects of their business. It is important that when you complete your VAT returns that you claim back everything you can and reduce the risks of any errors at the same time. There are a number of VAT tips that you should know to make your tax position more efficient.
Claim VAT On Mileage
There are many business owners, particularly those that have limited companies, who claim mileage to cover their business motor expenses. It is possible to claim VAT on the fuel of the mileage and this is determined according to the advisory fuel rates. To claim, you will need to determine the fuel rate per mile and then multiply this by the number of miles done for business use. You will then have to apply the VAT fraction to the number and this is the amount you can claim.
Choose The Right VAT Scheme For Your Business
There are a number of different VAT schemes that your business could benefit from. Depending on your business industry, you could benefit from a flat rate scheme. This scheme calculates VAT as a percentage of your gross income. This is a simple to use scheme which makes VAT calculations easy, you are also likely to pay less in VAT when you use this compared to the more standard schemes.
Claim VAT On Bad Debt
Many people do not realize that when a customer’s debt has been outstanding for more than 6 months and you are unlikely to receive payment, you can claim any VAT previously paid to the tax authority. It is important that you regularly review who owes you money. There is a method you can use to avoid reclaiming VAT on bad debts and this is to use a VAT cash accounting scheme.
When you use this scheme, you will not have to include VAT from a sale when you have not received the customer payment. The Vat will only appear on your VAT return after payment has been received.
Have A Separate VAT Account
VAT is a tax that businesses will collect for the tax authority. This is why you need to consider having a separate bank account for VAT so you do not fall into the trap of spending VAT on your business. This could result in cash flow problems when you have to pay the VAT to the tax authority. When you have a separate account, you can set aside the VAT at the end of every month so you have no nasty surprises when the end of the quarter comes. Check out these VAT guides from VAT Global.
Use The Right Software
It is important that you try and reduce the risks of errors when it comes to completing your VAT returns. Good accounting software will record your invoices and include them on your VAT return. This should eliminate the risks of VAT being declared twice or missed completely. Using a cloud based accounting systems will also make it easier for your accountant to review the information and make any amendments to the VAT return before you have to file it.
There are a number of online cloud based accounting systems that you can use. Of course, you need to ensure that it is user friendly and that you completely understand how to use it correctly.
