The simplest way to register for VAT is to complete a form online.
First register the business for a Government Gateway ID and link all of your existing tax accounts for things like PAYE, Corporation Tax or Income Tax if applicable. Then via the Government Gateway you can register the business for a new tax and select VAT.
You must register the business for VAT if the turnover has surpassed the registration threshold in the previous 12 months or if it will exceed the threshold in the next 30 days. The previous 12 months is assessed on a rolling basis and is not in line with the accounting period and therefore your accountant should always keep an eye on your turnover once the business starts nearing the registration threshold.
The VAT return will need to be completed either every quarter or every month. You should seek professional assistance to ensure that you are declaring and claiming VAT correctly. An item may carry VAT, e.g. a restaurant meal, however depending on its use it may not be reclaimable.
For example, staff entertaining maybe reclaimable, yet client entertaining is
Under a recent VAT return review, we sent the following comment to our client;
Rachel has claimed Costa Coffee expense, but I am unable to locate the receipt. The VAT should be £0.86 and not £0.94 as there is £0.45 for cream which carries Nil VAT. Please amend.
Although a little extreme, this would be picked up by a VAT Inspector and should be corrected.
Insight: You can submit the VAT return via the Government Gateway
or your agent can submit it through their own portal. Most commercial
bookkeeping software packages have the functionality to submit the VAT returns
directly once you enter your Government Gateway ID and password. VAT is usually automatically reclaimed via the VAT return submission process.
If HMRC contact you with a view to undertaking a VAT inspection, contact your accountant / advisor immediately. Do not worry, you may have been selected at random. Sometimes, a recent submission triggers the inspection if it was unusual in some way, sometimes an industry sector is targeted in general.
If you have relatively simple trading affairs, your advisor should speak to HMRC to find out if they would be prepared to accept electronic records. This can sometimes speed the process up and avoid a site visit.
If the HMRC Inspector needs to come to site, make it a pleasant experience for them. Set aside a room or a clear desk for them to work from and provide tea / coffee etc. They are only human! It may be possible for the inspection to take place at your advisor’s office instead of
your business premises although they usually want to speak to the business owner / director at some point during the process.
The inspector will have set out the timescales of records they want to look at prior to the meeting so ensure that it is all easily accessible. Summary sheets for files or indexes to make it easier for the inspector to navigate is usually a good idea. When they arrive explain how your filing system works so that they can find things quickly. Leave the inspector alone for them to review the files but make sure they know how to contact you if they have questions.
The inspector will usually give feedback on the day and tell you that they will follow it up in writing. This is useful as there may be areas you want your advisor to look at in more detail before agreeing with the findings.
Our client worked in the construction trade and was approached by HMRC to inspect his VAT records. His office was in a room in his own home and he preferred for the inspection to take place at our offices. This worked well as we had kept the majority of his VAT records on site for accounting purposes.
We set aside the meeting room for the inspector’s use and provided summaries of the VAT returns, summary of VAT records and an explanation of the filing system for invoices. After a couple of hours, the VAT inspector was satisfied that the records of the construction trade were correct, however as the client was a sole trader the inspector looked at other sources of income declared on his self-assessment return. The client’s children owned a holiday home but as the income was greater than £100 he was under a duty to declare it as their parent
on his tax return.
The inspector left saying that there would have to be an adjustment for VAT on this income as the client was VAT registered. She would follow this up in writing. We undertook some research and were able to prove that the holiday home was beneficially owned by the client’s children and disputed the application of VAT to this income. The VAT inspector conceded and
therefore the client did not need to pay any further VAT.
Insight: If you present your information clearly and make the inspector’s job easier, you greatly increase your chance of a smooth inspection.