Introduction
Value Added Tax (VAT) is a tax on goods and services that is collected by businesses at the point of sale. Businesses that are registered for VAT are required to submit regular VAT returns to HM Revenue and Customs (HMRC).
VAT returns are important for a number of reasons. First, they help HMRC to track the amount of VAT that is being collected. Second, they help businesses to claim back any VAT that they have incurred on their business expenses. Third, they can help businesses to identify any areas where they may be able to reduce their VAT liability.
The importance of keeping up to date with VAT returns
There are a number of reasons why it is important for businesses to keep up to date with their VAT returns.
- To avoid penalties and interest
If a business fails to submit a VAT return on time, they may be liable to pay a penalty. The amount of the penalty will depend on how late the return is submitted. In addition, the business may also be liable to pay interest on any outstanding VAT.
- To avoid being investigated by HMRC
If a business fails to submit VAT returns for a period of time, HMRC may investigate the business. This could lead to further penalties and interest, and it could also damage the business’s reputation.
- To ensure that the business is claiming back all of the VAT that it is entitled to
When a business purchases goods and services for its business, it may be able to claim back the VAT that it has incurred on those goods and services. This can help to reduce the business’s overall tax liability.
- To identify areas where the business may be able to reduce its VAT liability
By reviewing its VAT returns, a business may be able to identify areas where it is incurring unnecessary VAT costs. This could include things like buying goods or services from non-VAT registered businesses, or not claiming back all of the VAT that it is entitled to.
How to keep up to date with VAT returns
There are a number of things that businesses can do to keep up to date with their VAT returns.
- Set up a regular reminder
One of the best ways to make sure that you don’t miss a VAT return deadline is to set up a regular reminder. This could be a reminder in your calendar, or an email reminder from your accounting software.
- Keep good records
It is important to keep good records of all of your business transactions. This will make it much easier to complete your VAT returns when the time comes.
- Use an accountant or tax advisor
If you are unsure about anything to do with VAT, you should speak to an accountant or tax advisor. They will be able to help you to understand the VAT rules and to complete your VAT returns correctly.
Conclusion
Keeping up to date with VAT returns is important for all businesses that are registered for VAT. By doing so, businesses can avoid penalties and interest, protect their reputation, claim back all of the VAT that they are entitled to, and identify areas where they may be able to reduce their VAT liability.
