Small business owners need to take measures to avoid costly mistakes when it comes to calculating, reporting and paying Value Added Tax (VAT).
The best way to prevent errors and stay on the right side of HM Revenue & Customs (HMRC) is to have an expert take care of your VAT affairs.
Having a qualified accountant or bookkeeper can ensure that all calculations are correct, up-to-date, and submitted on time and in line with the latest VAT regulations, including Making Tax Digital.
Employing an accountant to keep on top of record keeping will go a long way in preventing expensive mistakes and financial penalties related to VAT.
Some of the most common VAT errors include:
- Entertainment: You can claim back VAT on entertaining employees, but not normally for clients.
- Split usage: Where you provide items such as cars or phones, you can only claim VAT back on business use.
- Inaccurate information: Entering the wrong figures on a VAT return may leave you liable to an investigation by HMRC or lead to you paying too much or too little tax.
- Filing late: Ensuring that you file the necessary VAT information, on time, each quarter is essential to preventing the accumulation of penalty points, which can lead to a fine.
- Failing to register: If you reach a taxable turnover of £85,000 or more in any tax year, you will need to register.
To cut down on the chance of errors there are a few things you can do to improve VAT reporting:
- Take time to update – Keep on top of VAT by setting aside a regular time each week – or each day – to update your accounting records.
- Maintain accurate records – It is important that you retain invoices and receipts so that you can accurately report VAT. This is easily achievable with the latest cloud accounting software and apps.
Speaking to a VAT expert will help you avoid many of these mistakes, which can be easy to overlook, but could be costly to you and your business.