Information regarding the process for VAT returns
For clients who have engaged us for VAT returns, we follow the same process as with other returns. We will always ask for initial confirmation that the accounting software is up to date before drafting a provisional return and sending this over for your approval. Only once this is approved can we submit the return, at which point we will provide you with the payment details.
💡It is the responsibility of a company’s directors to ensure the return is prepared in line with official guidance. Whilst NASA carries out checks before sending the provisional returns, we cannot guarantee the complete accuracy of them so we therefore advise clients to read our guidance below, HMRC’s official guidance (found here https://www.gov.uk/guidance/how-to-fill-in-and-submit-your-vat-return-vat-notice-70012) and ask that you raise any concerns with your client manager before approving returns for submission.
📈 Standard Rate Scheme:
This scheme is the one you will likely be more familiar with. Generally, you charge 20% VAT on top of your supplies to customers and reclaim any VAT paid on business purchases (unless subject to VAT block from HMRC which your client manager will be able to assist with). The net of these two figures is then paid to HMRC.
✅When you raise invoices within the accounting software you will be asked to select the VAT rate for your supplies. The software will then automatically include the invoice as appropriate on the relevant return.
✅When reclaiming VAT on business expenditure, accounting software will often assume the VAT rate based on the category of the expense. We always advise you check this against the VAT shown on the invoice or receipt, to ensure you only claim what you are allowed to.
❌If you do not have a receipt that shows VAT was paid, we advise not to reclaim VAT on that expense. HMRC can investigate and should you not be able to provide proof of purchase with VAT details, they may remove that transaction from your return. Penalties can also apply for inaccurate VAT returns.
📉 Flat Rate Scheme (FRS)
As with the standard scheme, on the FRS you generally charge your customer 20% VAT on top of your supplies.
However, unlike the standard scheme, you cannot reclaim VAT on business expenses. Instead, you pay a percentage of your total billing to HMRC, so that less than the 20% VAT charged is due to HMRC, meaning you make a small profit on each invoice where VAT is charged.
💡 There are different flat rates available that determine how much of your total billing is passed on to HMRC. The most common of these is Limited Cost Trader where 16.5% of your total billing is due to HMRC (reduced to 15.5% for the first year of registration). Please speak to your client manager if you want to discuss the rates available to you.
❔Whilst you cannot reclaim VAT on business expenditure, you may be able reclaim VAT on items capital expenditure costing over £2,000 in total.
❗Please note, this guidance is only intended to be an introduction to the VAT rules, which can be very complex, and so if you have any concerns (e.g., when working with an overseas client, ceasing trade etc) please speak to your client manager who will be happy to advise.