What is Value-Added Tax and Why Should Your Company Care?
by Benny Gala DNS AccountantsValue
Added Tax or VAT as is commonly known is, in the simplest terms, the tax
imposed by the UK government on the sales of goods and services. Any company
registered under the High Majesty’s Revenue and Customs (HMRC) has to pay this
tax to the government on a monthly or quarterly basis, the latter being the
norm.
Who
pays it and when?
Any company registered under HMRC pays a VAT on its goods
purchased and sold once its annual turnover crosses £ 85,000.The company needs to charge VAT on goods sold from customers and pay VAT to the
government on the goods bought. In an ideal scenario, the VAT charged must roughly be equal to the VAT
paid by a company. However, the concept of VAT returns comes into play in case
there is a substantial amount of difference in the two amounts.
What
are VAT returns?
A company has to file for VAT
returns every 3 months. VAT returns
refer to the amount of difference that arises between the VAT charged and the
VAT paid by the company. If the company pays more VAT than what it charges,
then the difference is refunded by the government after filing for VAT returns.
If it pays less than it charges, then the government recovers the remaining
amount from the company. Thus, while filing for VAT returns, bookkeeping comes
into action because that is the only means to
keep track of the transactions of the last few months and those are the
financials referred to whenever a company files for VAT returns.
How
to file a VAT return?
Once registered for paying VAT, businessis assigned to a “VAT stagger group”
which determines the months in which your payments are due. There are three
stagger groups:
· Group 1- quarters ending in March, June, September, and December
· Group 2- quarters ending in January, April, July, and October
· Group 3- quarters ending in February, May, August and November
The Vat filing and payment need to be done before the 7th of every quarter month. Once you have your financial statements and all the paperwork in place, you have to file the VAT Return online on the HMRC website.
Along with VAT, another important aspect to be given a lot of consideration is payroll accounting. You can get in touch with accountants in London for more information.Sponsor Ads
Created on Sep 1st 2020 10:58. Viewed 88 times.