Reclaiming VAT when you have a small business should not be complicated. The guide below is going to help you know the four easy steps you can follow if you want to succeed in reclaiming VAT.
Companies that have registered for VAT are able to use the handy option when reclaiming VAT on purchases related to the running of the business. There are some rules that have to be followed by companies so as to make sure they have properly calculated and documented VAT. For more information visit .
The process of reclaiming VAT can seem complicated and hard, especially when doing it for the first time. The article below is going to outline the documents needed, the expenses that are eligible, and when to file returns to make the process a little easier and quicker.
Step 1: Confirming your eligibility to reclaim VAT
Once you have finished registering, you will be provided with a VAT registration certificate that will have a VAT number. You should have this number close because you are going to need it because VAT number will be needed in your sales invoice from the point you registered, and you are also going to need it when you submit your returns.
You will also need to have been enrolled for an online account before you can submit the VAT returns online.
Step 2: Getting your invoices and proofs of purchase in order
Once the online account is ready, make sure your documents are in order.
You will need to have copies of receipts and VAT invoices or any other evidence that is going to show the items that you purchased and being used by the business. You don’t need to have the paper receipts and invoices, electronic versions can be used too. The proof of purchase has to be issued by someone who is VAT-registered and it must have the details that HMRC needs, and this includes address, business name, date of purchase, and VAT number.
What if there is no proof of purchase because maybe you have lost the receipts and invoices?
There are some exceptions. If what you have purchased is £25 or below, you don’t need to have a receipt. There are some expenses that are not going to need detailed records, a good example being receipts from petrol stations. You should always ensure you have proof of purchase when buying, and you should ensure the supplier you are getting them from is registered for VAT.
Step 3: Calculating how much VAT you are able to reclaim or pay
Once you have registered for VAT, you will have one more financial scrutiny that you will need to check regularly- your VAT account. It is going to be your own separate record of the tax that you are charging on sales and what you have paid on your purchases.
A VAT account is a simple running total of the VAT you have charged. There are some accounting software programs such as QuickBooks that are going to the work for you by automatically creating VAT records basing it on your business expenses and eligible sales.
When you have a separate record of VAT on purchases and sales, you will have an easier time calculating how much you owe HMRC and the amount you can reclaim. If you end up paying more VAT than what you charged customers, then HMRC is going to issue you a repayment. Otherwise, you will have to pay HMRC the calculated amount.
There is a slightly different format you are going to need if you are operating under the In this scheme, the VAT is going to be charged as a percentage of the turnover, and this means you will need to see if it is lower or higher than what you paid and received on sales.
Step 4: Submitting your VAT return online
Once you are done with registering, organizing your invoices, and knowing the amount you are going to pay or reclaim, what do you do next?
The final step is submitting your VAT returns. You should keep in mind that the expenses you want to claim have to be within the VAT period which your VAT return relates. If you submit your returns every quarter, then it will be a 3-month period.
The due date of submitting your VAT returns is a month and seven days from the end of that period. This is the same for both quarterly and monthly fillings. If you have your VAT period between the first of January to March 31, then the fillings for your expenses during the first three months of the year must be submitted by May 7.
There is also another rule you can benefit from, you can claim VAT on goods that you bought in the past before you registered for VAT, but the limit is four years back, and you must still have hold of the goods. This means goofs you have already sold before the first VAT return is not going to count. For services that your business used, you can claim up 6 months before registration.
So you have all your things in order, where do you submit them? You have some options when it comes to this.
Visit the HMRC website then log in, then submit the VAT returns.
Most of the accounting software programs in the market today can help you in submitting your VAT. You can easily learn to do this.
Once the returns have been submitted, you need to keep in mind that the payments have to be made electronically to HMRC. You should also remember about the deadlines, these are some of the things you are going to find on your VAT online account.
There is a penalty charged when you file your VAT late. If you are claiming for a refund, you can expect to get your payment in a period of 10 days after HMRC receives the return. Building the deadlines to your business schedule is going to make the process easy for you.