VAT Returns for Dummies...

HannahIOW

Hi everyone, sorry to post again but I really need some help. Been searching online for answers but I really do need some explanation in laymans terms...

My OH has a business which became VAT registered on 1st July 2010. I am doing the vat return for him. This is our first vat return. I logged into the online service to get a feel of it and find my way around it, it says I need to submit the return by the 7th November. From snippets I have read on here, I really need to submit it by 31st Oct at the latest so that they receive the payment by 7th nov? Want to pay it by BACS.

I really hope I am doing this right, I took our books (by books I mean literally an 'input' book and an 'output' book) to our accountant yesterday for him to have a glance at to see if I was doing anything obviously wrong. Turns out I just need to be a bit more detailed and have a column for gross as well as tax and net. We haven't visited our accountant for anything else as yet as he said he doesn't need to see our books until january 2011 (from when we first started in july 09 up until july 10).

So in the Input book I have written in all the things we have purchased and paid vat on, so parts, tools, also any stock which doesn't get charged back out such as refuse sacks etc (is it right to include those?) also have included phone bill and electric bill, fuel for the company van (how does it work claiming vat on fuel please?).

This is all seperated into July, August and September.

Output book has everything we have charged to customers written in it.

I have a few questions (no doubt will think of more as I go along)
Firstly how on earth do I do this?? lol
I have read on Business Link website we can claim vat from things purchased before being vat registered. I am guessing this includes the computer in the office, which is used to print invoices for our customers/order parts online? Also this would include tools?
Business Link seems to imply that anything you are claiming from before you were registered has to be claimed in the FIRST vat return - is this true?? So basically if we don't include it in this first return we've had it?
How far back can we claim for tools etc?

I am also a bit confused about what to put in each box on the return...


Please, please help :A

Gertie_Walker

You need to include the VAT you have paid on all your purchases, not just parts for customers - everything which is used to run the business. If you include the VAT on the fuel with the other purchases, this will automatically be included. Yes, you can claim for items you bought in preparation for trading.

chalkie99

I would suggest, without wishing to appear rude, that if you don't understand all these things then your accountant needs replacing if he is not interested in seeing you until January.

If you are unsure if you are doing things correctly then now is the time to get it sorted, not let confusion build in the coming months.

Did you know that you can attend one day or half day courses free of charge at your regional tax office? We did these and found them very useful. Give them a call to see what they have on offer.

Apricot

Total Value of vat charged on sales minus total vat paid on purchased items = total amount owed to taxman / total amount to be reclaimed.

Everything you have bought inn the last 3 months should be included. Claiming vat back for fuel is the same as anything else provided you get Vat receipts each time you visit the petrol station.

If you want pm me and I will email you a simple form you can use although really your accountant should be helping with this if you don't know what to do.
Are you using an accounts package to invoice your customers? There is usually a feature to help with vat calculations.

Gertie_Walker

Also, if he is not asking for your books until Jan 2011, this is leaving it a bit late as your SA is due for filing by 31 Jan! He should be asking for your records now, so that your accounts can be done and you have time to ensure you have enough to pay your first tax bill on 31 Jan.

JasonLVC

HannahIOW wrote: »

Hi everyone...

This is our first vat return. I logged into the online service to get a feel of it and find my way around it, it says I need to submit the return by the 7th November. From snippets I have read on here, I really need to submit it by 31st Oct at the latest so that they receive the payment by 7th nov? Want to pay it by BACS.

If you are already registered for online VAT return submission (and it looks like you are), then you have until 7th November to submit the VAT return and for payment to get to HMRC's bank. So you can submit your VAT return anytime between now and 7th November. For payment, if you pay by BACS, that is usually 3 working days to clear so if you pay by BACS on Tues 2 November it'll get there on time.

So in the Input book I have written in all the things we have purchased and paid vat on, so parts for repairing customers cars, tools for repairing the cars, also any workshop stock which doesn't get charged back out such as refuse sacks etc (is it right to include those?) also have included phone bill and electric bill, fuel for the company van (how does it work claiming vat on fuel please?).

This is all seperated into July, August and September.

Sounds goos so far, that is, expenditure and sales broken down by quarters. The input tax on non-customer expenditure like black bags and telephones is often called "overheads" and yes, you can reclaim the VAT on these items as they are all part of the business.

Fuel used in a van. A Van is a comemrcial vehicle for VAT purposes, this means that you can reclaim 100% of the VAT relating to fuel for this vehicle. If the vehicle is taken home at night/used for personal journies, you should really apportion the VAt you reclaim between what is 'business' and what is 'personal'. This can be done by reviewing the vehicle use over say a month and noting the private mile v business mileage. So if you do 500 miles a month and 400 of them are business, then 1/5 of the VAT isn't reclaimable on the fuel (ie, reclaim 80% of the VAT, don't reclaim the other 20%).

I have read on Business Link website we can claim vat from things purchased before being vat registered. I am guessing this includes the computer in the office, which is used to print invoices for our customers/order parts online? Also this would include workshop tools?

You can reclaim VAT on goods/assets (tools/vans) purchased 4 (four) years prior to your VAT registration date (see VAT certificate to confirm your VAT registration date). The proviso is that you must still have those goods/assets in stock at the date of registration....so tools/vans will be okay but if you've bought 6 fan belts pre-registration and you've fitted three and got three in stock, you can only reclaim the VAT on the remaining three fanbelts, so you'll need to be thorough with your purchase invoices/stock control.

You can also reclaim input tax relating to service (legals, marketing, etc) 6 months prior to your registration date. Consumables are not recoverable, so things like diesel in the van, mobile phone calls, broadband pre-registration are already 'consumed' and so they are not 'available/in stock' hence not recoverable.

Business Link seems to imply that anything you are claiming from before you were registered has to be claimed in the FIRST vat return - is this true?? So basically if we don't include it in this

I am also a bit confused about what to put in each box on the return...

As the business is a garage, some of the invoices to customers include and MOT. These can not have vat charged on them, so is this going to make our vat amount look a bit odd to the tax man when I submit it?
We don't do our MOTs on site at the moment so have to pay somebody else to do them. So we aren't paying vat on them either, but we are paying for them... so do I include our bill for MOTS in the Inputs or again will that make our vat amount look wrong?


Please, please help :A

See my comments in red (above inside your post/quote)

With regard MOT's, you need to speak to your Accountant as this is a complex area of VAT. MOT's are outside the scope of VAT as they are a statutory legal requirement. Outside the scope means you do not charge VAT to the customer but you can still reclaim all your overhead/input tax.

Your problem is that you do not do the MOT's, someone else (with a license) does them for you. You need to make it absolutely clear to your customers (a big sign, statement on your invoice), that you are acting as an agent for XYZ MOT Centre Ltd and not acting in your own right - if your MOT garage charges you say £30 for the MOT, then your invoice must show this £30 on the invoice seperate to any other items on the invoice and this £30 will be shown as a 'disbursement' and is not subject to VAT.....but if there is any kind of mark-up added on top of the £30 by yourselves or if you make out as if you're doing the MOT yourself or if you don't seperate out the MOT on the bill, then the MOT charge becomes standard rated. See here (item 6):-

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_PROD1_025636

and here (para 25.4):-

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_CL_001596&propertyType=document#P2526_207156

JasonLVC

Sorry about the abrubt ending, I had to take a very urgent call and didn't want what I'd already typed to go astray, so submitted my earlier post but hadn;t finished answering the questions.


First VAT returns should, ideally, include all pre-registration input tax for goods/services, as already described. Thjis will lead to a big reclaim of VAT on the 1st return and it will be verified by HMRC (but they verify all 1st returns anyway so nothing to be worried about). HMRC will want you to fax/email some copies of purchase invoices over to them and if all is in order, they'll release the refund. Thereafter, VAT returns will most likely be you owing them money.

There is a view that you can reclaim pre-reg input tax on your subsequent VAT returns, but if you did this, the reclaim would be taking in the wrong VAT period (ie, a later VAT period) and so you would lilely have to disclose this late reclaim to HMRC via a VAT652 form and only draws needless attention to you, so its best if you can scoop up all that input VAT now, rather than later.


As to what to put in each box :-

http://www.hmrc.gov.uk/vat/managing/returns-accounts/completing-returns.htm

Above link is an excellent guide, but basically, Box 1 (VAT charged on sales), Box 2 (blank), Box 3 (same as Box 1), Box 4 (VAT you're reclaiming), Box 5 (sum of boxes 1-4). Box 6 (value of your sales excluding VAT), Box 7 (value of your purchases excluding VAT), Boxes 8 and 9 (leave blank).

Normally box 6 should equal the VAT fraction of Box 1 (so if you sold £100 of goods in Box 6, the VAT on £100 is £17.50 which is the figure you'd find in Box 1), but as you are making some sales with no VAT on (the MOT's) then that pattern will not be there, but no worries, just the nature of your sales.

HannahIOW

Thanks for all the helpful replies so far.

Gertie_Walker wrote: »

Also, if he is not asking for your books until Jan 2011, this is leaving it a bit late as your SA is due for filing by 31 Jan!

Yes that does seem to be cutting it a bit fine!

JasonLVC wrote: »

First VAT returns should, ideally, include all pre-registration input tax for goods/services, as already described. This will lead to a big reclaim of VAT on the 1st return and it will be verified by HMRC (but they verify all 1st returns anyway so nothing to be worried about). HMRC will want you to fax/email some copies of purchase invoices over to them and if all is in order, they'll release the refund. Thereafter, VAT returns will most likely be you owing them money.

There is a view that you can reclaim pre-reg input tax on your subsequent VAT returns, but if you did this, the reclaim would be taking in the wrong VAT period (ie, a later VAT period) and so you would lilely have to disclose this late reclaim to HMRC via a VAT652 form and only draws needless attention to you, so its best if you can scoop up all that input VAT now, rather than later.

Sounds best that we claim it all now then really, better hunt out those receipts etc.

Thanks for the bit about what to put in each box, that has helped a lot. We are going to change our accountant, really don't like the one we were going with (not to mention the fact they both look like members of the undead :eek:)

JasonLVC

HannahIOW wrote: »

Thanks for all the helpful replies so far.



Yes that does seem to be cutting it a bit fine!


Just had OH read the paragraph about MOTs, I got a grunt and a 'well I'll be charged income tax on the mots anyway' *confused smilie* he is so not interested in this vat stuff, basically I have to just get on with it lol.


Sounds best that we claim it all now then really, better hunt out those receipts etc.

Thanks for the bit about what to put in each box, that has helped a lot. We are going to change our accountant, really don't like the one we were going with (not to mention the fact they both look like members of the undead :eek:)

I'm happy that I could help you in your quest.

As for the MOT thing, do re-read the links I gave you and when you get a new accountant, mention this to him/her. It is really important you understand the difference between a disbursement from the MOT centre and you just charging for an MOT - HMRC have a field day with this sort of thing and there's a lot of case law where garages don;t charge VAT on the MOT's and then get stung for the VAT a few years down the line - that's not to scare you, just I'm aware of the pitfalls in this sector and that's one of them.

Best of luck with your continuing venture.

Savvy_Sue

HannahIOW wrote: »

Just had OH read the paragraph about MOTs, I got a grunt and a 'well I'll be charged income tax on the mots anyway' *confused smilie* he is so not interested in this vat stuff, basically I have to just get on with it lol.

No he won't, and this is something he really ought to get a basic understanding of, even if he pays you to keep the books on a day to day basis.

He pays income tax on his income after allowable expenses. For an MOT: £30 in from customer (=income), £30 out to the MOT centre (= expenses), taxable income = £0.