If you have shifted over to vat or value added tax system then you need to keep 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 can be accessible in case the hmrc vat department asks for them or pays a visit.
In the last decade, an increasing number of countries including those within the EU have shifted their tax system on services and goods to vat. This system 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 UK 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 last 12 months.
When you become part within the cycle of vat tax chain then you will need 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 need to be mentioned in each vat invoice that you will be required to generate with each sale. Additionally, you will ought to display vat rates of every product or service sold to the clients. When you purchase services or goods from vat registered traders you will also have to check if their invoices too stick to the same format as per hmrc vat.
Furthermore, the hmrc will also specify the frequency of filing vat returns so that all vat that has 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 a 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 which should enable you to speedily complete all vat formalities consistently.
In the UK, you will also have to maintain up-to-date vat accounting records including bank accounts, profit and loss accounts, cash books, sales and purchase books, delivery notes, and other books of accounts highly relevant to your business. In case 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 goods or services within your records. There are many accounting schemes in vat like annual accounting scheme, cash accounting scheme, flat rate scheme, retail schemes, and second-hand goods scheme that will need specific techniques to maintain the required records.
Once you are a vat registered trader in the UK then you will have to follow vat rules and regulations that have been specified by the hmrc vat department. These methods are certainly not really hard and by maintaining proper vat accounting standards, it will become very easy for you as well as the hmrc to get access to your vat records.