If you have shifted over to vat or value added tax system you’ll need to keep vat accounting standards for quick entry to VAT records. Although most eu countries including the UK don’t have rigid or set standards to maintain vat records, you still must make sure that all relevant vat figures can be easily obtainable in case the hmrc vat department asks for them or pays a visit.
In the last decade, a lot more countries including those within the European Union have shifted their tax system on services and goods to vat. This method taxes services and goods every 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 may have converted into a vat registered trader once your taxable sales might have hit the vat threshold limit of ?70,000 in the last 12 months.
Once you become an integral part within 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’ll be issued a distinctive vat number that will need to be mentioned in each vat invoice that you’ll be needed to generate with each sale. You will also have to display vat rates of each product or service sold to the 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 per hmrc vat.
Furthermore, the hmrc will even specify the frequency of filing vat returns to ensure that all vat that has been collected by you on your sales might be paid to your government. Your vat returns will have to give a summary for vat paid on purchases and vat collected on taxable sales. For those who like to go in for any vat reclaim or vat refund there are separate vat forms that need to be filled up and delivered with documentary proof. The hmrc offers several vat online services including online filing of vat returns which should enable you to speedily complete all vat formalities consistently.
In the UK, you’ll have to maintain up-to-date vat accounting records including banking accounts, profit and loss accounts, cash books, sales and purchase books, delivery notes, and other books of accounts relevant to your enterprise. If you deal in goods or services that attract reduced vat rates, zero vat rates, or are vat exempt then you’ll also need to clearly specify the classification of those services or goods in your records. There are various accounting schemes in vat such as 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.
As soon as you are a vat registered trader in the United Kingdom then you will have to follow vat 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 very easy for you and the hmrc to have access to your vat records.