Introducing bookkeeping for VAT

Introducing bookkeeping for VAT

by | Jul 19, 2024 | Latest News

VAT Bookkeeping  

Is your business VAT-registered? Value Added Tax (VAT) is a tax charged on most goods and services provided by registered businesses within the UK and can often be a complicated tax to navigate. All businesses must register for VAT if your taxable supplies for the last 12 months exceed £90,000 (from April 1st, 2024), although businesses who don’t reach the threshold are also able to register. Unfortunately, VAT can be unforgiving, with HMRC having stringent penalties for breaches of the legislation.  

At Fiander Tovell, we are well versed in all areas of VAT reporting to keep your business on the straight and narrow. We’re always on hand to help, as we know just how tricky VAT can be – particularly for smaller businesses. So, we’ve highlighted some key areas you need to consider to make sure your business stays compliant with UK VAT regulations.  

Administration and Record Keeping 

Making Tax Digital (MTD) requires all VAT-registered businesses to keep digital records and submit returns using MTD-compatible software, with limited exemptions. 

Once registered for VAT, you must file quarterly returns online. These returns need to include the output tax on sales and the deductible input tax on expenditures. The submission deadline is within one month and seven days from the end of the reporting period, and electronic payment is mandatory. 

Maintaining thorough and up-to-date records is crucial for VAT compliance. This involves keeping detailed records of your supplies, purchases, and expenses, along with a VAT account summarising the output and input tax. These records must be kept for six years and should be maintained in software that meets HMRC requirements, as HMRC does not provide free software. 

In summary, adhering to filing deadlines, maintaining accurate records, and using compliant software are each essential practices for VAT-registered businesses to ensure your compliant and manage VAT obligations efficiently. 

This is one of the many reasons businesses look to outsource their bookkeeping to us. We help businesses maintain all crucial records to ensure you meet HMRC requirements. Our systems will keep your business compliant leaving you to focus on core business activities.  

Special Schemes 

There are special schemes available to simplify VAT accounting. For example: 

  • The Flat Rate Scheme allows smaller businesses with annual taxable turnover below £150,000 to pay VAT as a percentage of their total business income, reducing record-keeping requirements. 
  • Retail Schemes are tailored for retailers to ease the impracticalities of maintaining extensive records.

Inspection and Penalties 

HMRC may conduct control visits to ensure VAT rules are being applied correctly and that returns and records are properly maintained. You should not assume that the absence of errors during a visit means they are fully compliant. HMRC has wide powers to penalise your business for late registration, errors in returns, and other breaches of VAT regulations. 

Not to worry though, with our systems, we’ll make sure your business hands in all documents on time with full assistance. If any issues arise, we’ll help you negotiate with HMRC to reach a settlement to keep your business growing.  

How we can help 

Ensuring VAT compliance is essential, and outsourcing your bookkeeping to specialists is a smart move. At Fiander Tovell we specialise in bookkeeping and can assist you in several ways, from tailoring your accounting systems to gathering VAT information accurately and quickly, to ensuring your business is VAT-efficient. We also provide assistance with VAT return completion and negotiate with HMRC in case of disputes. Our team can advise on suitable schemes and help you comply with the MTD for VAT regime. 

For a more detailed VAT Guide, please visit here.

By outsourcing your bookkeeping to Fiander Tovell, you can focus on running your business while we handle the complexities of VAT compliance. If you would like to discuss any of these points or seek tailored professional advice, please contact our Commercial Client Director, Fabrice Legris, at fabrice.legris@fiandertovell.co.uk

Basis Period Reform: Key accounting dates and Making Tax Digital

Basis Period Reform: Key accounting dates and Making Tax Digital

by | Jun 13, 2024 | Latest News

Welcome to the final part of our series discussing all things basis period reform. In part 1, we outlined the changes involved and how they affect a business’ chosen accounting date along with their tax obligations. Part 2 delved into overlap relief and how best to utilise it during the transition.  

Now, in this final part, we investigate the finer details of basis period reform coming into force in 2023/24, with information on practicalities and interacting with Making Tax Digital, as well as some important considerations for businesses. 

Practicalities 

Can I change my accounting date to avoid basis period reform? 

Changing accounting date to 31 March or 5 April (or any date in between) will reduce ongoing administrative burdens from April 2024 onwards. In particular, it will remove the need to apportion figures from more than one set of accounts, and the possibility of having to file and correct provisional figures (see pt1).  

However, it will not remove the need to apply the transitional rules in 2023/24, or prevent additional profits being brought into account. 

If the change in accounting date takes effect in 2023/24, the business may however be able to access spreading (see pt2). 

The usual restrictions on changing accounting date are also disapplied from 2023/24. This means that, if it wishes, a business can draw up a set of accounts exceeding 18 months in length to effect the change. For example, if a business has a year-end of 30 April, they could change this by drawing up a single 23-month set of accounts for the period from 1 May 2022 to 31 March 2024. There is also no need to worry about having a commercial reason for the change where there has been a previous change in the last five years. 

However, whether a change in accounting date is suitable or possible is also a commercial decision, and businesses will need to consider the wider pros and cons beyond tax. 

How will basis period reform interact with Making Tax Digital? 

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will be introduced from April 2026 for businesses with turnover of £50,000 or more, and from April 2027 for those turning over at least £30,000. 

Taxpayers in scope of MTD ITSA will have to submit quarterly updates of their income and expenses to HMRC. These quarterly updates will align with the tax year, and not the accounting period of the business. 

The introduction of the tax year basis from April 2024 may make alignment with MTD for ITSA quarters easier. However, it should be remembered that, if the business does not have a 31 March or 5 April year-end, then under the tax year basis it is not the transactions actually taking place in the tax year which are subject to tax, but rather the apportioned profits of the relevant accounting periods. 

It is not yet clear exactly how software will handle the transition from quarterly updates to the taxable profit for the year, where a business does not have a 31 March or 5 April year-end. 

And that concludes our three-part series on basis period reform! If you missed any previous installations, please refer to the blog section on our website or the links within the article.  

If you would like to discuss any part with one of our advisors or need help with the transition, please contact our Commercial Client Director, Fabrice Legris, at fabrice.legris@fiandertovell.co.uk.