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Paying a Value Added Tax (VAT) liability can be a large burden for small businesses. This article is aimed at owners of small businesses in the UK and focuses upon how their VAT burden can be successfully managed.
Ten tips on managing your VAT liability:
1.If you do not need to compulsory register for VAT, calculate if it would be worthwhile to de-register for VAT.
2.If you are not registered ensure that you review your requirement to register on a monthly basis, as there are financial penalties for late registration.
3.Make sure that you are calculating your VAT liability correctly. Many business pay VAT on items they shouldn’t and don’t reclaim all the VAT that they are entitled to.
4.Keep up to date with VAT legislation changes that effect your business. It may be worth considering retaining an accountant to keep an eye on this for you.
5.File all VAT returns on time and make sure that VAT payments are made prior to deadlines. There are financial penalties for not meeting VAT deadlines.
6.If you are experiencing cash flow difficulties and can not make your VAT payment on time, then contact HMRC to negotiate payment terms.
7.Calculate if using the flat rate VAT scheme would save you money. This is for businesses with a turnover under £150,000. It saves administration and could be financially beneficial.
8.Consider if you would benefit from cash accounting for VAT purposes. If your taxable turnover is under £1,350,000 a year this method allows you to account for VAT on the basis of cash received and paid, rather than the invoice date or time of supply.
9.Would you benefit from using the annual accounting method. If your turnover is under £1,350,000 under this scheme you make only one VAT return per year.
10.Should you be using a retail scheme. These schemes are for retailers and they are an alternative if it’s not practical to issue invoices for a large number of supplies direct to the public.
VAT is a complex and specialist area of taxation if you are in any doubt over how it applies to you or your business then it is recommended that you contact an accountant or VAT specialist with expertise in this area. You can also contact HMRC direct for advice.
This article is an introduction to certain aspects of VAT legislation only and it is not intended to be comprehensive.
The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice. In addition it is emphasised that much of the information provided in this article is time sensitive and the rates and legislation associated with VAT will change.
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Tags: VAT
Posted in Taxes · August 21st, 2010 · Comments (0)
Many people confuse the jobs of a bookkeeper and an accountant, especially since bookkeepers are sometimes referred to as accounting technicians or accounting clerks. While very similar, a bookkeeper focuses on maintaining timely and accurate records of financial data – ranging from income, payments, sales, and purchases. An accountant, on the other hand, takes the information recorded by the bookkeeper in order to create financial statements. Since the jobs are intertwined, some accountants actually start their careers as bookkeepers.
Bookkeeper’s can choose between single-entry recording systems and double-entry recording systems. The single-entry system is used by many small businesses and only utilizes income and expense accounts. However, the double-entry system that uses a balancing system of debits and credits is actually more accurate and will ensure that the books are truly accurate. In the double-entry system, every transaction is record in two different areas of the books.
A bookkeeper can record all the business transactions in ledgers, journals or on a computer database. Everything that is involved in the business including sales, purchases, cash, credit, pay outs, and other items are recorded in these very important places. Everything that is spent, bought, or sold throughout the days events are then recorded in these types of journals, whether digital or not, so that the business has an accurate accounting at the end of the week.
Income statements and balance sheets are created from ledgers, which include various financial data that is divided into sections. The general, or nominal, ledger details the various income, expenses, liabilities, and assets of a business. The customer, or sales, ledger illustrates the various financial information transacted with customers. The supplier, or purchase, ledger shows the company’s transactions with various suppliers.
A bookkeeper will periodically, usually once a week, make sure that the books are balancing properly. What they can do is either print out the database or go through the ledger line by line to make sure that everything is balancing properly. This includes creating a credit and debit column starting with a day of the week, usually corresponding with when your sales week starts and when it ends. This is a good way of making sure that there are not any mistakes in your bookkeeping that could possibly create a ton of problems down the road.
Large businesses often employ multiple full-time bookkeepers in order to keep up with their various bookkeeping needs, as the job can be lengthy and complicated. However, small businesses often find hiring a qualified bookkeeping service a better allocation of funds over employing a full-time, in-house bookkeeper. A bookkeeper will visit the business as often as needed to ensure that complete, accurate, and balanced financial records are kept in a detailed set of books for the company to use for its accounting.
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Tags: accountancy, bookkeeping, finance, small business, Taxes
Posted in Taxes · July 16th, 2010 · Comments (0)