If you have shifted to vat or value added tax system then you need to keep vat accounting standards for easy access to VAT records. Although most eu countries like the UK don’t have rigid or set standards to keep vat records, you will still need to ensure that all relevant vat figures can be easily obtainable in case the hmrc vat department wants them or pays you a visit.
Over the past decade, a lot more countries including those from the EU have shifted their tax system on services and goods to vat. This method taxes goods and services each time there is a transaction, thus raising revenues for governments while ensuring minimal tax leaks. If you’re a trader in the UK then you may have converted into a vat registered trader once your taxable sales would have hit the vat threshold limit of ?70,000 in the previous 1 year.
Once you become an integral part within the cycle of vat tax chain then you will have to follow certain guidelines imposed by the HM Revenue and Customs department or hmrc department regarding vat accounting. You will be issued a unique vat number that will need to be mentioned in each vat invoice that you will be required to generate with each sale. You will also have to display vat rates of every products or services sold to the clients. Whenever you purchase services or goods from vat registered traders you will also have to check if their invoices too follow the same format as per hmrc vat.
In addition, the hmrc will also specify the regularity of filing vat returns to ensure that all vat that’s been collected by you on your sales might be paid to your government. Your vat returns will have to give a summary for vat paid on purchases and vat collected on taxable sales. In case you want to go into for any vat reclaim or vat refund there are separate vat forms that need to be filled up and delivered with documentary proof. The hmrc offers several vat online services including online filing of vat returns and this should enable you to speedily complete all vat formalities on a regular basis.
In the UK, you’ll have to maintain up-to-date vat accounting records including bank accounts, profit and loss accounts, cash books, sales and purchase books, delivery notes, and other books of accounts highly relevant to your business. If you deal in goods or services that attract reduced vat rates, zero vat rates, or are vat exempt then you’ll also have to clearly specify the classification of such services or goods in your records. There are various accounting schemes in vat such as annual accounting scheme, cash accounting scheme, flat rate scheme, retail schemes, and second-hand goods scheme that will require specific techniques to maintain your required records.
Once you are a vat registered trader in the UK then you will need to follow vat rules and regulations which have been specified by the hmrc vat department. These techniques are not really hard and by maintaining proper vat accounting standards, it will become easy for you and the hmrc to have access to your vat records.