If you have shifted 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 like the UK don’t have rigid or set standards to maintain vat records, you will still must make sure that all relevant vat figures can be accessible in case the hmrc vat department asks for them or pays a visit.
Over the past decade, an increasing number of countries including those from the European Union have shifted their tax system on goods and services to vat. This method taxes services and goods every time there is a transaction, thus raising revenues for governments while ensuring minimal tax leaks. If you are a trader in the United Kingdom then you may have turned into a vat registered trader once your taxable sales might have hit the vat threshold limit of ?70,000 in the previous 12 months.
Once you become an integral part in the cycle of vat tax chain then you will have to follow certain guidelines imposed by the HM Revenue and Customs department or hmrc department regarding vat accounting. You’ll be issued a unique vat number that will need to be mentioned in each vat invoice that you will now be required to generate with each sale. Additionally, you will ought to display vat rates of each product or service sold to your clients. When you purchase goods or services from vat registered traders then you will also need to see if their invoices too stick to the same format as per hmrc vat.
In addition, the hmrc will even specify the frequency of filing vat returns to ensure that all vat that’s been collected by you, on your sales can be paid to your government. Your vat returns will need to give a summary for vat paid on purchases and vat collected on taxable sales. In case you want to go in for any vat reclaim or vat refund there are separate vat forms that need to 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’ll need to maintain up-to-date vat accounting records including banking accounts, profit and loss accounts, cash books, sales and purchase books, delivery notes, and other books of accounts highly relevant to your enterprise. If you offer goods or services that attract reduced vat rates, zero vat rates, or are vat exempt then you will also need to clearly specify the classification of those services or goods in 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 require specific techniques to maintain the required records.
Once you turn into a vat registered trader in the United Kingdom then you’ll need to follow vat rules and regulations that have been specified by the hmrc vat department. These methods are not very difficult and also by maintaining proper vat accounting standards, it will become very easy for you personally and the hmrc to get access to your vat records.