4 How and when do I pay my VAT ?
5 Choosing the right VAT scheme for your Business
4 How and when do I pay my VAT ?
The deadline for payment each quarter is shown on your online return and is normally one month and seven days after the end of your VAT period . You must pay any VAT due electronically .
If you make a mistake , you can correct it on your next VAT return provided that the error is not more than £ 10,000 . You can also correct it on your next VAT return if the error is less than £ 50,000 , but only if it is also less than 1 % of your turnover for the current VAT quarter . Anything above this and you must write to HMRC immediately .
5 Choosing the right VAT scheme for your Business
There are three VAT scheme available to business on registration : Standard VAT Accounting or Flat Rate VAT or the Cash Accounting .
5.1 Standard VAT Accounting
One of the main advantages that most businesses gain from becoming VAT registered is being able to claim back the cost of VAT paid on any purchases for goods or services made through the business .
You will need to complete a VAT return every quarter and if you are using standard VAT accounting then your VAT return will need to include :
Output tax – Output tax is term for the VAT that you have charged your clients or customers . This is the percentage ( currently 20 per cent ) that you have added onto the prices of your goods and services . Even if they have been invoiced but you are yet to collect payment , you must still include the VAT on your return for that quarter .
Input tax – Input tax is the what you yourself have been charged in VAT , the amount that has been added on to goods or services you have bought from your suppliers during that quarter . As with output tax , you must include anything billed during that period , even if you haven ’ t yet paid for it .
5.2 The Flat Rate VAT Scheme
Eligible businesses can make application for the flat rate VAT scheme at the same time as the online VAT registration . The helps to simplifies your VAT return and help small businesses benefit from some extra revenue through VAT .
In basic terms , you would charge VAT on your goods and services at the full amount of 20 per cent , but then would only pay HMRC back a reduced amount , usually around 13.5 to 14.5 per cent depending on what industry you work in . That means you get to keep the difference between the VAT collected and the VAT paid back to HMRC .
5.3 Cash Accounting VAT Scheme
The Cash Accounting Scheme is another way of dealing with VAT and is often used by businesses who would benefit from only paying back VAT to HMRC once they have been paid by their clients or customers . It also means you cannot claim back VAT on goods or services which you have not yet paid for . As with standard VAT accounting ,
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