The new ‘making tax digital’ initiative has brought in a lot of changes, so here are some top tips on how to make your VAT payments less painful. One of the main introductions is a mandatory policy for both quarterly VAT returns and payments to be made electronically. The policy stipulates that the payments must be received by HMRC, and not just sent, seven days after the end of the month following the end of the VAT period. For example, if your VAT return period ends on 31st November, HMRC must have received your return and payment by 7th January.
Tip 1 – Be wise about your payment method
There is a multitude of ways of making electronic payments such as Direct Debit, internet/telephone banking and Bank Giro Credit payments. However, the best way to ensure payments are made on time is to set up a Direct Debit so that payments will automatically be taken from your account. Then all you have to do is make sure your VAT return is submitted on time. Whereas other payment methods require involvement and a knowledge of processing times.
Tip 2 – Make sure you have the money
It can be difficult collecting enough money together for your quarterly VAT return. One method to ensure you have enough is to work out the output tax each month and how much input tax you claim, and then net the amount off so you are aware of your liability. Then transfer the money into a savings account so you will have the money available. You can also use this method for your corporation tax.
Tip 3 – Spread payment with annual accounting
If your turnover is under £1,350,000 you can use annual accounting. This method allows you to pay in monthly instalments, based on the previous year’s VAT liability. Once nine monthly payments have been made, each of 10% of the estimated liability, the final balancing payment of the actual VAT due has to be paid when the annual VAT return is submitted. By choosing the annual accounting method, the return has to be submitted two months after the end of the period, rather than the normal one month. You can also write to the VAT man if you think the VAT you owe is going to be significantly more or less than the estimated amount.
Tip 4 – Make sure you pay your VAT on time to avoid penalties
If you can’t pay your VAT return and payments on time, contact HMRC’s Business Payment Support Service and arrange a payment schedule, by doing so you will avoid any penalties for late payments.
For more information regarding VAT returns and payments, contact your Stockport Accountants, IN-Accountancy on 0161 456 9666 or email@example.com