Finding the Value
... in Value-Added Tax
VAT registration is a big step for a small business. Let RIFT Accounting make sure it's in the right direction.
Okay, so you bit the HMRC bullet and registered your business for VAT. Good for you - you've shown the world you've got confidence in your company, and you're ready to take the next step on your journey. So, what step is that, exactly? It's time to dig into your RIFT Accounting survival pack, grab your charts and compass and start drawing up a map of the future.
Right now, that future is all about making your VAT status work for you. A couple of important things are about to start changing in your business, so you need to make sure you're prepared to leap the pitfalls and scale the mountains. Here's a brief rundown:
Crucially, you need to know your VAT scheme. For example, if you're on the Flat Rate version you still charge the normal rate to your customers but don't reclaim VAT on your business expenses. Instead, you send a reduced amount to HMRC and use the rest to count against the VAT you're paying out.
If it's already gone wrong and you've sent out invoices without VAT that should have included it (if you didn't know you'd go over the threshold, for example), then you'll need to send an additional VAT-only invoice to cover those charges.
So let's talk about charging VAT. Not every type of business is covered by the standard 20% tax, so the first thing to know is the right rate to use. Once you're on the right track with that, you then:
As for the VAT you reclaim on your business expenses, you need to remember they must relate to your "business purpose" - that is, they have to be for the VAT-taxable goods or services that you supply. As always, get in touch and we'll make sure you never miss out.
The records you have to keep are pretty specific and detailed, so make sure you're on top of those right from the start. Also, there are different rules for things like charities - and for cancelling your VAT registration if you need to. Get in touch with RIFT Accounting if you need advice and we'll show you how to navigate those waters.
There are a few dangers that can trip up even the wiliest of adventurers. For example, even once you've registered, you can't start charging your customers VAT until you've got your VAT number - even though you'll still be paying VAT during that period. If you've raised your prices before your number arrives (which is probably not a bad idea), make sure your customers understand what's happening. Once you've got your VAT number (which should be inside 14 days, either by post or to your online VAT account) , you can reissue the affected invoices to show the VAT. Again, talk to RIFT and we'll show you how that works.
Now that you're officially a VAT-registered business adventurer, there's a lot more you need to know to make the most of your newfound prestige. You may be able to backdate claims for VAT you've paid before registering, for example - but if you pay the wrong amount of VAT on a purchase you won't be able to claim the full amount back.
You've got a lot of ground to cover and it's easy to get lost in it, so send up a smoke signal for a RIFT Accounting rescue team and stay tuned for more Voices from the RIFT.