If you have shifted over to vat or value added tax system you’ll need to maintain vat accounting standards for easy entry to VAT records. Although most eu countries including the UK don’t have rigid or set standards to maintain vat records, you still need to ensure that all relevant vat figures are easily accessible in case the hmrc vat department wants them or pays a visit.
In the last decade, a lot more countries including those from the EU have shifted their tax system on goods and services to vat. This method taxes goods and services each time there is a transaction, thus raising revenues for governments while ensuring minimal tax leaks. If you’re a trader in the United Kingdom then you certainly may have converted into a vat registered trader as soon as your taxable sales might have hit the vat threshold limit of ?70,000 in the previous 1 year.
Once you become an integral part in the cycle of vat tax chain then you will have to follow certain guidelines imposed by the HM Revenue and Customs department or hmrc department regarding vat accounting. You will be issued a distinctive vat number which will have to be mentioned in each vat invoice that you’ll now be needed to generate with each sale. You will also have to display vat rates of every products or services sold to your clients. When you purchase goods or services from vat registered traders you will also need to check if their invoices too stick to the same format as specified by hmrc vat.
In addition, the hmrc will even specify the frequency of filing vat returns so that all vat that’s been collected by you, on your sales can be paid to your government. Your vat returns will need to provide a summary for vat paid on purchases and vat collected on taxable sales. For those who like to go into for any vat reclaim or vat refund there are separate vat forms that should be filled up and delivered with documentary proof. The hmrc offers several vat online services including online filing of vat returns and this should help you to speedily complete all vat formalities on a regular basis.
In the UK, you’ll have to maintain up-to-date vat accounting records such as banking accounts, profit and loss accounts, cash books, sales and purchase books, delivery notes, and other books of accounts highly relevant to your business. If you deal in goods or services that attract reduced vat rates, zero vat rates, or are vat exempt then you will also have to clearly specify the classification of such goods or services in your records. There are various accounting schemes in vat like annual accounting scheme, cash accounting scheme, flat rate scheme, retail schemes, and second-hand goods scheme that will require specific methods to maintain your required records.
Once you turn into a vat registered trader in the United Kingdom then you’ll have to follow vat rules and regulations which have been specified by the hmrc vat department. These methods are certainly not very difficult and also by maintaining proper vat accounting standards, it will become easy for you and the hmrc to have access to your vat records.