Know the Rules on VAT Filing
From this April, if at or since 31 December 2009, your business turnover for the previous 12 months was more than £100,000, or you are newly registering for VAT, you have to file your returns online and pay electronically. HMRC is phasing out paper returns and this will eventually apply to all businesses, so even if you’ve already registered but don’t reach the £100K threshold, it is a good idea to go electronic if you can. Paying via an online direct debit actually gives you more time to pay than making payments by any other method.
The standard VAT periods are quarterly, with returns and payments due by the end of the following month. If you file online, when you have a VAT payment to make, you have an extra seven days to file your return. If your payment choice is by direct debit, HMRC will take your amount three days later, giving you the possibility of an extra 10 days for the amount to be earning interest for you.
Remember though, that if you are making a nil return or require a repayment, you don’t have the extra seven days to file. HMRC are not likely to make the £100 or more surcharge in such circumstances, but you will probably receive a warning notice and lose brownie points.
Other VAT schemes are available to small businesses. Under the Cash Accounting VAT Scheme, you only have to report actual payments from customers, instead of the amounts on the invoices you send out. Under the Annual Accounting Scheme, you have to estimate the amount of VAT you will owe for the year and make regular prepayments. At the end of your accounting year, you must file an accurate return and pay the balance due or claim a repayment at that time.
Whatever arrangement you have with HMRC, make sure you always file your returns and make your payments on time, so you avoid paying any surcharges and interest.
