Value Added Tax (VAT) is one of the most complex and demanding tax regimes that businesses must adhere to and can often result in businesses inadvertently overpaying or underpaying VAT.
With so many other business costs to pay for, overpaying on VAT is the last thing you need, yet underpaying can lead to severe penalties for not compliance.
It’s a tricky line to navigate, which is why we’ve put together this handy guide on how to maximise your tax reclaims, while still remaining compliant with HMRC’s demanding regulations.
Keep a Record of Everything
Paperwork and accurate record keeping is crucial for maximising your VAT claims. In order to claim back, you must be able to clearly show the amount you have paid with either VAT invoices, receipts or proof of transaction.
Vat invoices show the VAT rate and amount that you paid from a VAT registered business with a VAT number.
Retail receipts don’t always include VAT, however you can still use them if the total of the purchase was under £250. Here, you will need to work out the VAT element.
Proof of Transaction
If you don’t have a receipt, it is still possible to claim VAT with a proof of purchase, such as a bank statement that shows the transaction amount between your business and a VAT registered business, plus any other supporting documentation.
Here, it is necessary to prove that the purchase was exclusively for the use of your business.
Without any of the above, you won’t be able to claim back on your purchase. Even small purchases soon add up, so don’t lose out by being careless with receipts and invoices.
Encourage Your Staff to Save on Business Travel
If your employees frequently travel for work, it is important for employees to submit the necessary document so you can reclaim VAT on expenses such as:
- Transport and fuel
- Internet and phone services
Implement Automated VAT Solutions
The rules and regulations regarding VAT refunds can be complex and legislation is frequently changing. Most of this can be difficult to keep track of for most businesses that don’t have a dedicated accountant to keep on top of it all.
Fortunately, automated solutions can help streamline your company’s VAT management and maximise your claims.
Enter the Correct Details on Your VAT Return
Of the eight boxes to complete on a VAT return, Box 6 is often the most troublesome depending on whether your business uses the Flat Rate VAT scheme or not. This box is where HMRC typically finds the most mistakes and can end up being costly.
To begin with, it’s important to know the 3 common VAT schemes:
The VAT Cash Accounting Scheme
Under this scheme, you only pay and reclaim VAT based on the money you have actually paid and received.
The VAT Standard or Normal Accounting Scheme
Under this scheme, you pay VAT on your sales, whether or not your customers have paid. You then reclaim VAT from your suppliers’ invoices, whether or not you have paid them.
The VAT Flat Rate Scheme
Under this scheme, you charge your customers at the appropriate rate (e.g. 20%) but you pay over a reduced percentage (e.g. 14.5%) to HMRC. This then means that you are unable to reclaim any VAT on your expenses apart from some on capital equipment.
How to Fill in Box 6 Correctly According to Your VAT Scheme
If you’re using the Flat Rate VAT Scheme, it’s important to double check that Box 6 is the gross income you’ve applied the flat rate percentage to. If you use the Cash Accounting Scheme, then you need to enter the net income (net of VAT) in Box 6.
Then, do a check back to the figure in Box 1. For example, if you’re using the Flat Rate Scheme and your percentage is 14.5% and your VAT inclusive income for the quarter is £50,000, your Box 6 Figure should be £48,000 and your Box 1 Figure will be £6,960 (14.5% x £48,000).
If you’re using the Cash or Standard VAT Accounting Scheme, Box 6 will be your income net of VAT (£40,000) and Box 1 will show £8,000.
Seek Professional VAT Help
One of the biggest mistakes a business can make when it comes to submitting a VAT claim is failing to get help from a VAT specialist.
They can give you a second opinion and assist in planning advice on complex issues such as land, property, imports and other high risk areas for VAT.
Expert VAT Services with Ryans
The ever widening scope of VAT, the constant stream of detailed changes to the regulations, and the ever growing demands of HMRC call for a trained professional eye to ensure that you do not fall foul of the regulations and don’t end up paying the Exchequer more than you need to!
At Ryans Chartered Accountants, we provide an efficient and cost effective VAT service, including:
- Assistance with VAT registration
- Advice on VAT planning and administration
- Use of the most appropriate scheme
- VAT control and reconciliation
- Help with completing VAT returns
- Planning to minimise future problems with HMRCS
- Negotiating with HMRC in disputes and representing you at VAT tribunals
To find out more about how our dedicated team of VAT experts can help you maximise your reclaims, get in touch with us today.