How to calculate your VAT payment. An explanation for new small business start ups.
National Advice Service can answer your general questions regarding calculating VAT deficits or overpayments, rules, procedures, disclosure of confidential VAT information, VAT rates and publications. Additionally, the National Advice Service is able to assist you with air passenger duty, insurance premium tax, rebated oils, aggregates levy and money laundering regulations.
What they cannot offer is advice or assistance clearing a VAT or other tax debt, the VAT registration process or enquiries about specific VAT transactions.
You can reach the National Advice Service in a number of ways. Call their helpline at 0845 010 9000. If you would like to speak to someone in Welsh, call 0845 010 0300 Monday to Friday from 8am to 6pm. Interpretation services are available for those who do not speak English as their first language, simply tell the advisor when you call. Textphone service is available if you have hearing difficulties at 0845 000 0200.
Your VAT registration number and postcode should be available before you call; you will need both of these records to receive accurate advice. Select option one if you have lost your VAT return form and do not require additional assistance. Select option two if you require VAT or Intrastat publications or advice. Option three will route your call to an HMRC advisor as well as landfill tax, climate change levy and another tax categories. You will be directed to a VAT advisor if you do not make a selection.
If the advisor is unable to answer your VAT question, he or she will re-route your call to the appropriate office or offer the telephone number of an office that can assist you.
The difference between the output and input taxes are what you must pay HMRC upon your annual return.
If your taxable turnover is less than the current threshold annually, you need not worry about calculating VAT. This is because businesses turning over less than this are exempt from VAT registration. You may wish to register voluntarily if you believe there your turnover might exceed the threshold, the fee for not registering is steep.
VAT as an Expense
Some business situations allow the business owner or accountant to calculate VAT as an expense of the business. To calculate VAT as an expense, the total VAT paid to HMRC during the assessment period must exceed the total VAT received from HMRC in the same period. The excess of VAT paid is considered an expense.
Should the situation be reversed, and the total VAT received from HMRC during the assessment period exceeds the total VAT paid to HMRC during the same assessment period, the refund is not counted as a business earning.
Ideally, you should speak to your tax consultant before making any changes to your tax calculation methods. A tax consultant should be able to offer advice accurate for your special needs.
Jack Shepard is one of Accordance VATs tax experts.
Accordance are Tax consultants, specialising in Calculating VAT.
Please visit Accordance VAT for expert advice from leading Tax Consultants and information about EU VAT and other international tax compliance issues.