In case your value added tax return (VAT) in London is late, Her Majesty’s Revenue and Customs (HMRC) will be charged for a percentage of the unpaid Value added tax at the due date. You’ll not be charged the very first time this happens, but you a warning will be issued. If it occurs again inside the following twelve months, an estimate will be made to determine a surcharge of up to 15%. There are various kinds of tax, therefore you should make certain you apply the right amount. Charging 17.5%, 5%, 0% or exempt could make a noticeable difference to your profit margins.
If you’re unsure as to what value added tax to charge, seek expert consultancy from a value added tax consultant. Paying VAT on-line implies that the due date of the return and payment to arrive at Her Majesty’s Revenue and Customs can be extended by an extra seven calendar days. VAT registered companies benefit from this scheme as it allows them to pay VAT in 9 monthly installments and after that pay a balancing payment, every year. There are one million businesses eligible for this, but your annual turnover, excluding Value added tax must be less than 1.35 million.
The main advantages are that you don’t receive extortionate VAT bills when it’s uncomfortable since your payments are staggered through the year. This aids your cash planning, less time is spent filling out Value added tax returns as you only have to fill our one return a year as opposed to the usual four. In case your annual turnover is less than 660, 000, you’re eligible for the cash accounting scheme whereby you just pay value added tax on invoices that have been paid. You’ll not be capable to use this scheme once your turnover reaches 825, 000.
The main benefit of using this cash accounting scheme is that it helps cash flow, particularly if you’ve clients who pay late. This also implies that you can’t reclaim value added tax until you’ve paid your suppliers. You can calculate your value added tax payment as a flat rate percentage of your turnover by using this scheme. The percentages are calculated according to which sector you trade in. By using this scheme, you’re unable to reclaim the VAT that has been paid as this is taken into account and added to the flat rate percentage. The flat rate scheme saves you time and perhaps money as you do not need to account for the VAT charged on every sale and purchase made. Any decisions made by Her Majesty’s Revenue and Customs must be confirmed in writing, this acts as an insurance contract.