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Important VAT Advice and Tips for Small Businesses

Value Added Tax is a tax you pay to buy anything in the country, whether a bottle of your favourite drink or a mobile phone. The VAT rules for different businesses are different as per their annual turnover. 

So, if you have a small business or up to something, you must know these important terms and their rules. So, check out this article for the best important VAT advice and tips for Small Businesses.

A Brief Introduction to the Meaning of VAT

Before landing on some important tips about VAT for small businesses, you must know everything about VAT. Companies pay VAT to Her Majesty’s Revenue and Customs (HMRC). The customers pay VAT on any product or service they get from the businesses. 

Then, the company pays the calculated amount to the authorities. So, indirectly it’s an amount paid by the customers. The VAT registered business submits VAT returns every three months

Important VAT Advice and Tips for Small Businesses

Here are some important VAT advice and tips for small businesses:

1. Small Businesses Eligible for VAT

You may know or not, but if your small business is making less than £85,000 annually, you can skip the VAT. Although it’s not mandatory, and it’s your call. Also, if your turnover is less than the threshold amount, £85,000 annually, you can still register for it. 

TIP: It’s a good idea to register for VAT irrespective of the threshold turnover. As a small business, you need to gain the trust of clients. Certain organisations only work with VAT registered companies. So, to build the trust of customers, you must register for the VAT.

2. Follow HMRC’s Guidelines

As soon as the annual turnover for your small business turns over  £85000, you should immediately register for the VAT. You can do it by simply reaching to HMRCs website and helpline number. 

Initially, filing VAT can be a very confusing task, so you can reach out for professional VAT returns services, which will help you choose tailored plans. In addition, the registration, de-registration and all the work becomes easy. Finally, one can focus on business and leave these important legal issues in trusted hands.

3. Choose Your Plan Wisely

Yes, there are various plans you can avail of for Paying VAT for your small business. The most popular one is the Flat Rate Scheme. It’s specially designed for small businesses as in the Flat rate scheme; you can benefit from a 1% on your flat rate during the first year following registration. Some of the other schemes are:

  • Cash Accounting
  • Annual Accounting Margin schemes for second-hand goods.
  • Margin schemes for second-hand goods, etc.

4. Never Forget to Claim any Allowances

A good professional and ample knowledge of VAT returns will tell you if you’re eligible for some allowances. There are allowances for good second-hand services or many other small businesses. Online or cloud accounting will save you loads of time as the team will avoid all the errors and introduce you to all the schemes. 

The benefits of accounting outsourcing for your startup are numerous, as you can manage your finances and get good suggestions. So, always take advice and look for all the allowances you can claim.

5. Working From Home Business can Claim an Amount

It’s a very important thing that many small businesses often forget. So, if you are operating your business from home, you can claim back a fixed nominal sum which can be approximately £26 per month. Also, you can show the documents mentioning your home related costs. Considering every aspect of VAT return will make your business very profitable and trustworthy.

Read Costly & Common VAT Mistakes and How to Avoid Them

6. Always Reclaim the Business Costs

Yes, during your VAT registration and all the legalities process, you can show the documents and billing details of the business setup. It can be machinery or any item purchased for the business. Stay honest, as these should not be of any personal use. This way, you can reclaim some amount as compensation for such purchasing. You must know your rights, and professional expertise can guide you well.

7. Recover VAT on Motoring Costs

Your small business uses transportation to accomplish the work. Well, you can recover VAT on these. It’s part of the business which helps you to grow. So, you can lease a car for your business, and 50% of the VAT on the lease charge is potentially recoverable

In addition, 100% of maintenance is split out on the invoice. It’s your right, and you can reclaim this VAT. There are many liabilities in business and aspects you couldn’t think of. So, your first call should be to services that provide VAT returns. 

8. You can Challenge HMRC

Lastly, one of the most important tips is that HMRC can be wrong sometimes. It’s a human governing body, after all. You can challenge them if you know all the rules and have good records of everything. So, discuss pre-registration and post-registration issues with professionals and choose what’s best for you. It will make your business better, and no one can exploit it.

Additional Quick Tips For Small Business VAT Payers 

Here are some best tips for all the small businesses:vat payers

  • Keep all records of your tax returns; this will be helpful.
  • You must submit VAT returns and pay the VAT due on time, irrespective of your business. It will avoid all legalities and penalties and save lots of time.
  • If you have bad debts over six months, you can go for Claim Bad Debt Relief (BDR). You can get some relief under this process. 
  • You need to know if the amount of VAT return is valid as a small business. Giving away too little or too much money will harm your business. So, expert advice is a must.

Wrapping up

Starting a small business is a dream come true, and with all the main work, the legalities seem tough. But, one of the best pieces of advice is to involve expert professionals who can explain and handle all tax returns. This will save lots of time and help you focus on your primary goal. So, always pay right and on time!

Read Also Difference Between VAT Return and Tax Return in the UK

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