As a small business owner, you juggle multiple responsibilities—from hiring staff and managing operations to developing business strategies.

When it comes to the financial aspect of your enterprise, understanding the nuances of Value-Added Tax (VAT) can be a daunting and tedious task. Besides, your skills would likely be better suited to running your business rather than calculating tax payments.

That’s where professional accountancy firms come into play. Below, we have outlined just a few of the ways an accountant can assist your small business in its handling of VAT.

This is the first instalment of a series of blogs we will be posting regarding VAT, so make sure you stay up to date with our website for further valuable insights.

Simplifying VAT registration

The first step in managing VAT is registering your business with HM Revenue & Customs (HMRC).

A company must register for VAT if it has exceeded a prescribed figure (£85,000 as of August 2023) in the last 12 months or if it is predicted to exceed that figure in the next 30 days.

You may also voluntarily register for VAT before the threshold. This is done when VAT registration could benefit the business by allowing you to claim relief on business expenses.

While this might sound straightforward, there are different VAT schemes to consider, such as the Flat Rate Scheme or the Standard Rate Scheme.

An accountant can provide tailored advice on which scheme best suits your business model and help to make the registration process smoother. This helps to ensure that you do not over (or under) pay your VAT responsibilities.

Accurate record-keeping

Once registered, you are required to keep meticulous records of all transactions that include VAT – as well as many other pieces of financial data.

This isn’t merely a best practice; it’s a legal requirement.

With the introduction of Making Tax Digital (MTD) for VAT, maintaining accurate digital records has become even more critical to the success of your business.

A professional accountant can set up accounting software tailored to your business, ensuring that your digital record-keeping is both compliant and efficient.

Calculating input and output VAT

Understanding the difference between input VAT (the tax you pay on your purchases) and output VAT (the VAT you charge on your sales) as well as calculating each correctly, is essential for accurate VAT returns.

Accountants can do this complex task for you, ensuring you neither overpay nor underpay on your VAT.

Filing VAT returns

Filing VAT returns on time is fundamental to avoiding penalties.

Whether it’s a monthly, quarterly, or annual return, an accountant can handle the entire process, from compiling the necessary documentation to submitting the return electronically via MTD-compatible software.

An accountant will ensure your tax returns, and any other documents, get filed on time and accurately.

Advising on VAT reclaims

Many small business owners miss out on the opportunity to reclaim VAT simply because they are not aware of the process or what activities are eligible for VAT returns.

An accountant can identify eligible expenses and guide you through the reclaim process so that you don’t have to miss out on valuable tax reliefs. This could save your business a lot of money over time.

Preparing for VAT inspections

HMRC audits businesses to ensure compliance with VAT regulations.

An audit can be a stressful experience, but having an accountant by your side can make a significant difference.

Accountants can prepare you for an inspection by ensuring that your records are in order and that you are in full compliance with VAT laws.

Staying up-to-date with legislation

VAT legislation is continually evolving, especially in a post-Brexit landscape.

Accountants keep abreast of these changes and advise you on how to adapt your business practices accordingly.

A proactive approach from your accountant can help you avoid potential pitfalls and take advantage of any new opportunities.

Hire an accountant to help you with your VAT

While it’s possible to handle these responsibilities in-house, the time, effort, and risk involved often outweigh the benefits.

Outsourcing your VAT handling to a knowledgeable accountant not only ensures compliance but also frees you up to focus on what you do best – growing your business.

Managing VAT is a complex but essential part of running a small business and it is a far more complicated subject than one blog post can cover.

That’s why we will be posting a selection of blogs on VAT during the coming weeks to help educate you and your business on this very important issue. Make sure you check our website regularly for more information.

To learn more about VAT handling, or other services we provide, get in touch.