How to Avoid VAT Pitfalls
When you are running a small business, there will be many challenges on your way. Sometimes, it can be too much and complicated for you but it can be simple if handled well. From bookkeeping task to filling tax returns, everything needs to be done accurately.
Value Added Tax (VAT), being an important subject for the small businesses needs to be handled very carefully right from the start. If you fail to do so, many errors like incorrect records, VAT payment problems, VAT reclaim on expenses exempt from VAT and few others can take place. As a result, all of these errors can lead to penalties which definitely affect your business.
In this post, we will discuss some of the best ways for small business owners to avoid VAT pitfalls.
Choose the right VAT scheme
There are different types of VAT scheme available for small businesses. Cash accounting scheme, flat rate scheme and annual accounting scheme are few popular ones. As a small business owner, you can choose any of them that can make your VAT accounting easier and suit your business type.
Set up a VAT account
If your business is subjected to register for VAT, you must set up a VAT account. Doing this will help you to reclaim tax on goods your business is eligible for. However, you will need to have correct records to submit VAT returns accurately for this. So, keeping correct records and updating them is very important.
Choose the right software
Just like VAT schemes, there are many software packages available for your business. These software help to simplify the VAT accounting and other work in short period of time. It is therefore best to choose accounting software that automates VAT invoicing, filing and submitting online VAT returns to the HMRC directly.
Don’t reclaim VAT on business entertainment expenses
When you reclaim VAT for items like business entertainment expenses, errors happen. That’s because VAT on business entertainment expenses cannot be reclaimed. However, input tax on such expenses can be reclaimed when they are made to employees.
Hire a professional
Managing your VAT and concentrating on your business can be very tough. So, it is advisable to hire a professional VAT adviser who can check your VAT implications and provide expert advice on your situation.
When your VAT is sorted out, you can solely focus on core activities of your business. Thus, read all these tips and follow all them to keep your business always on top.