VAT Support

With a thriving business comes the need to register for vat if your turnover has exceeded the current threshold of £85,000. We offer to check your financial data if you are uncertain as to whether you should be registered and can provide you with an estimated timescale. Registration has to take place within 30 days of reaching the threshold. We are able to deal with the registration process for you.

Vat returns are normally prepared quarterly and can form part of our bookkeeping service, giving you piece of mind that they are accurate and filed in time.

Important changes to VAT penalties - January 2023

The former surcharges for late payment are being replaced by penalty points and subsequent penalty charges of £200. (maybe make this bigger)

The new penalty scheme explained

The vat surcharge notice is being replaced by a new penalty system for returns submitted late and for payments made late. This change comes into effect for vat periods starting on or after 1 January 2023.

For each return you submit late you now receive a penalty point until you reach the penalty point threshold. Once you reach that threshold an automatic £200 penalty becomes payable, followed by further penalties of £200 for each subsequent late submission while you’re at the threshold.

VAT returns not affected

  • First Vat return if newly registered

  • Final Vat return after you cancelled your Vat registration

  • One off returns that cover a period other than a month, quarter or year

The penalty point threshold for your accounting period

The penalty point threshold is set by your accounting period. The threshold is the maximum points you can receive.

Accounting period

Annually 2 Penalty points threshold

Quarterly 4 Penalty points threshold

Monthly. 5 Penalty points threshold

Paying VAT late

This affects everyone who submits returns, including a nil or repayment return for vat periods starting on or after 1 January 23. These penalties apply to any payment not made or not made in full by the expected due date.

Summary of late payment penalties

You’ll get a first late payment penalty if your payment is 16 or more days overdue.

When your payment is 31 or more days overdue, your first late payment penalty increases, and you get a second late payment penalty. The penalties are based on 2% for the first late payment penalty and 4% for the second late payment penalty of what is outstanding at that point. This carries on until the balance is paid in full.

MTD for VAT - what you need to know

Making tax digital (MTD) for Vat was introduced in April 2019 and all businesses are now required to use MTD compliant software to submit their Vat returns. Xero, our preferred accounting software is fully compliant with MTD and we are able to help you get set up.

Is it compulsory?

Yes, all vat registered businesses must comply with the MTD rules since April 22. This includes sole traders, Partnerships and landlords with at least one property in the UK. There are some exemptions to MTD, for example for people who are older, have disabilities, live in remote locations or are prevented from using computers due to their religious beliefs.

What records to I need to keep digitally?

The rules on records you need to keep for Vat have not changed. Any invoices and receipts received in paper form should still be kept unless transferred onto an accessible digital device.

Digital records received by email or other from portals must now be stored safely on either a physical storage drive, cloud storage or by transferring them to a purposely made software such as Dext or Hubdoc.

In addition to invoices and receipts you also need to keep the following:

  • self billing agreements

  • vat adjustment records

Vat schemes and what they mean

  • Standard Rate Scheme

    The amount of Vat a business pays to HMRC is based on the difference between vat charged to customers also known as output tax and vat paid to suppliers also known as input tax. This can result in a refund if your vatable supplier costs outway your income. The returns are usually filed on a quarterly basis.

  • Cash Accounting Scheme

    On this scheme you only pay vat on your sales once you have received the funds from your customer but you also only reclaim the vat on purchases once you paid for the goods or services yourself.

  • Flat Rate Scheme

    Under this scheme you do not claim back any of the vat paid to suppliers, instead it is calculated on your total sales inclusive of vat multiplied by the vat flat rate percentage. This percentage is determined by the type of your business and can vary significantly.