Five Things You Need to Know About VAT Accounting
You may know nothing about VAT Accounting, but that doesn’t mean that you should remain ignorant. If you’re a VAT taxpayer, the more you know about it, the more benefit you and your business can derive from it. Here are five essential things that you need to know about VAT Accounting.
1 – VAT Registration and De-Registration
How do you know whether you should register or de-register for VAT? If your turnover is more than £68,000 per year, you must register for VAT. If your turnover for the year is under £66,000, you are allowed to de-register. Once you’ve registered for VAT, that’s when a VAT consultant will be useful to you. They can advise you on the latest regulations and keep you and your business on the good side of HM Revenue and Customs.
2 – VAT Schemes
Businesses that are registered for VAT need to account for tax when they invoice customers or when their own suppliers invoice them. HM Revenue and Customs has a number of VAT schemes that allow your business to save time or only account for VAT when they are actually paid. To work out which scheme bests suits you, seek the qualified advice of an experienced VAT advisor.
3 – VAT Records
It is your legal and mandatory obligation to keep accurate VAT records regarding any tax paid or received. You need to keep these records for a fixed number of years and there are penalties for poorly kept records. Keeping accurate VAT records helps you to avoid paying too much tax. To find out more about keeping accurate VAT records, speak to a VAT accounting specialist.
4 – VAT Responsibilities
Do you know what your VAT responsibilities are? If not, you could fall foul of the VAT penalty system. A VAT consultant will let you know your VAT responsibilities and help you to stick to them. You don’t need to be a VAT expert, when you have a VAT adviser, they’ll keep you informed of all your responsibilities regarding Value Added Tax.
5 – VAT Penalties
As of 2009, a brand new VAT penalty system is in place. There are two scenarios under which a penalty will apply. The first is in the case of failure to notify about an under-assessment. This occurs when a VAT Return is not submitted and Customs have to estimate the assessment. If this assessment is lower than the actual figure it should be and the taxpayer does not inform HM Revenue and Customs, then a penalty is liable.
Second, when someone submits a document that includes an error, this will also trigger a penalty. An error when reasonable care was not taken will be punished with 30% penalty. An error which is deliberate but not concealed from HM Revenue & Customs will be punished with a 70% penalty fine. Finally, an error which is deliberate and where concealment can be proved will result in a 100% fine. By using a professional VAT consultant, you can avoid making mistakes and paying the price for it.
To benefit from the expertise and experience of a VAT adviser visit VATark to find out how they can help you manage your VAT accounting.
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I am buying a commercial property with a business partner. VAT is payable on the purchase ( it is a 999 year lease). I am not sure if it is the building itself which is VATABLE or the previous compnay who owned the property. Are buildings themselves VATABLE? If so, can they be deregistered?
My intention is to apply to change the status of the property from B1 offices to live work premises. There is another property in the building which has done this so this is feasible
My business partner is allowed to buy his share of the property as part of his SIPP
We will be operating a counselling business in the property. We will operate under a Limited company . Counselling is not VATABLE
I would also want to rent out rooms to other counsellors when I am not using it
Is it possible to register for VAT so we can claim all the expenses incurrred in doing up the property and then de-register?
A friend of mine is running a similar business in commercial property, and she is not registered for VAT and charges VAT neither for renting out rooms or for the counselling which takes place, which is in any case not VATABLE
Please can you advise?
Thanks,
Hi Ruthie
Thanks for your question(s).
There seem to be a number of different strands here that would have to be considered separately.
First you appear to be working with a partner for buying the building, which would be a separate entity from the one supplying counselling services. So you have to deal with this separately from the counselling services question.
You may be able to have the option to tax the property made ineffective for the conversion work to live-work premises. This might also allow you to have the conversion work carried out at the reduced rate of VAT.
Second, the counselling business you say is not vatable. I have to ask why? Unless the services provided are covered by a VAT exemption counselling is generally liable to VAT. VAT only has to be charged when the income from the services exceeds the VAT registration limit.
If you’d like to give me a call I’d be happy to discuss it with you.
Robert