If you have shifted over to vat or value added tax system then you need to maintain vat accounting standards for easy access to VAT records. Although most eu countries including the UK do not have rigid or set standards to maintain vat records, you will still need to ensure that all relevant vat figures are easily accessible in case the hmrc vat department asks for them or pays you a visit.
Over the past decade, an increasing number of countries including those within the European Union have shifted their tax system on goods and services to vat. This system taxes goods and services each time there is a transaction, thus raising revenues for governments while ensuring minimal tax leaks. If you are a trader in the UK then you might have turned into a vat registered trader once your taxable sales would have hit the vat threshold limit of £70,000 in the previous 12 months.
Once you become an integral part in the cycle of vat tax chain then you will need 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 now be required to generate with each sale. You will also have to display vat rates of each product or service sold to your clients. When you purchase goods or services from vat registered traders then you will also need to check if their invoices too follow the same format as specified by hmrc vat.
In addition, the hmrc will also specify the frequency of filing vat returns so that all vat that has been collected by you on your sales can be paid to the government. Your vat returns will need to provide a summary for vat paid on purchases and vat collected on taxable sales. In case you want to go in for a vat reclaim or vat refund then 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 help you to speedily complete all vat formalities on a regular basis.
In the UK, you will also need to maintain up-to-date vat accounting records such as bank accounts, profit and loss accounts, cash books, sales and purchase books, delivery notes, and other books of accounts 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 will also need to clearly specify the classification of those goods or services 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 methods to maintain the required records.
Once you turn into a vat registered trader in the UK then you will need to follow vat rules and regulations that have been specified by the hmrc vat department. These methods are not very difficult and by maintaining proper vat accounting standards, it will become very easy for you and the hmrc to get access to your vat records.