Are You Guilty of These Common VAT Mistakes?
VAT – value added tax – is a 20% levy on goods and services in the UK. It’s collected for HMRC by companies, who can also reclaim the VAT on their purchases.
If it isn’t right, it will inevitably cause problems down the line. Overpaying could push your business into the red, while underpaying will result in repayment and surcharges. Both outcomes mean unnecessary hassle for you. So, it’s best to get it right first time. Read on for 7 common VAT mistakes and how to avoid them.
1. The wrong date – or no date at all
When you’re paying or reclaiming VAT, make sure you get the dates right. Each invoice, whether incoming or outgoing, needs a ‘time of supply’. This isn’t always the same as the date of sale though. For goods, it’s the date they’re collected, sent or installed. And for service, it’s the date the work is completed.
2. Business or leisure?
The line between business and personal use isn’t as clean cut as you might think. Things like company cars and fuel as well as business entertainment purchases can be affected by special rules. For cars, any private use exempts the car and fuel from reclamations. While any VAT on business entertainment costs cannot be reclaimed.
3. Incomplete invoices
To claim VAT you need complete invoices on both purchases and sales. Anything that indicates ‘pro-forma’ or ‘not for VAT’ cannot be used. You should also ensure – for purchases – that they are in the name of the business, rather than owners or employees.
4. VAT exemption
Remember than not everything you buy has VAT added on. Things like books, certain building services and protective equipment are exempt from VAT, so there’s no point trying to claim it back. Check the products that are exempt or charged at different rates before completing your returns.
5. International slip-ups
Buying or selling internationally? You might be able to zero-rate your goods. Anything exported outside the EU or to an EU business that’s VAT registered can be zero-rated. But companies within the EU that aren’t VAT registered should be charged VAT as normal.
Stress-free VAT management
If you’re finding it hard to keep your business’s tax affairs in line, UWM can help. We are a team of expert accountants based in Leeds, with over 30 years’ experience helping businesses of all shapes and sizes. Our VAT services cover everything from registration to liability and compliance, taking a big weight off your shoulders.
With our help, you can slash the time and cost of VAT management, maximise returns and remain fully compliant. Need help with anything else? We also offer a wide range of specialist accounting services to cover all bases. Get in touch today to discuss your needs – we look forward to hearing from you.