Following are 5 common VAT Mistakes and how to avoid them.
VAT is a complex business issue that requires careful consideration. It is a government-imposed tax collected by VAT-registered businesses at each stage of the production process. There are numerous technical details and countless wise decisions. As a result, many companies and enterprises make frequent and costly mistakes.
1. Typing In The Wrong Figures
Whenever it comes to entering precise figures, the majority of VAT Mistakes occur with box number 6 on the VAT return form, which represents the ‘total value of sales and any other outputs apart from any VAT.’ This is because the amount that must be entered is determined by the VAT scheme that is used. If you’re using the “flat rate VAT scheme”, the total amount entered must be the gross income to which the flat VAT percentage has been applied. Box 6 must include your income net of VAT if you use the “cash accounting scheme” or perhaps the standard accounting scheme.
2. Making a VAT claim on insurance
It is yet another of the most common errors that business owners make. Insurance is VAT-exempt, so no VAT should be claimed on it. Business insurance does have a tax included in the cost, but it is not VAT and thus cannot be reclaimed on your VAT return.
3. VAT claim without proof
Another of the best VAT Return Tips is to keep VAT receipts as well as proof for at least six years. One of the most common errors in VAT returns is failing to keep records. The trick is to keep all of your bills, Vat Mistakesreceipts, documents, and proofs organized and ready so that you can access them at any time.
4. Making an early claim for import VAT
The most common error with import VAT would be reclaiming VAT on invoices from the shipping agents. Whereas these invoices are valid, they only account for the agent’s fees and not the import VAT when it comes to claims.
5. VAT on personal supplies
All Personal and employee supplies, such as fuel, company cars, and business entertainment, are subject to additional regulations. Fuel VAT could be reclaimed on a VAT return if procured for business reasons only.
Simple measures to avoid common VAT problems
Choosing accurate VAT schemes is the most important VAT return tip. Understanding the 3 primary VAT schemes for businesses will allow you to select the one that is best for your company and guarantee the statistics on your VAT return are accurate. Maintaining accurate records is very important to avoid VAT Mistakes. A majority of the VAT Mistakes discussed are the result of poorly maintained records. One of the VAT Return Tips is to choose an accounting software that automates VAT invoicing to make it simpler to manage.
A VAT stamp validates your business and relieves you of stress. VAT return, therefore, is undoubtedly a difficult but necessary procedure. Connect with Meru Accounting today to learn more about the common VAT Mistakes that you need to avoid.
