VAT is a tax that is automatically calculated as part of the product price in EU countries. So if you’re a business or sole trader who sells products and services to customers in the EU, it’s important to make sure you know your law when it comes to VAT. It can be a complicated system but luckily there are now plenty of websites out there that can help you submit your VAT return online for free, meaning it’s never been easier to keep on top of your day-to-day accounting.
What is VAT?
VAT stands for ‘value-added tax’ and is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT charged on a product depends on the country in which it is sold.
In most countries, VAT is levied on most goods and services at every stage of production and distribution. Businesses that are registered for VAT collect the tax on behalf of their government and then pay it over to the tax authorities. This system is known as an indirect tax because businesses act as tax collectors on behalf of the government.
VAT is usually calculated as a percentage of the selling price of a product or service. The standard rate of VAT in the UK is 20%. That means if you buy a product or service for £100, you would expect to pay £120 including VAT.
What is a VAT Return?
A VAT return is a document that businesses use to report the value added tax (VAT) they have collected from customers and paid to suppliers. The return is also used to claim back any VAT that has been paid on purchases.
VAT-registered businesses must file a return with HM Revenue & Customs (HMRC) every quarter, even if they have no VAT to pay or reclaim. Returns cover the period from the start of the previous quarter to the end of the current quarter. For example, returns filed in April would cover the period from January 1st to March 31st.
Businesses submit their VAT returns electronically using HMRC’s online service. They will need their Government Gateway user ID and password to log in. Once logged in, businesses can view their VAT account, which shows how much VAT is due and when it needs to be paid.
It is important for businesses to file their VAT returns on time as late submissions may result in penalties.
How to submit a VAT return online
In order to submit a Value Added Tax (VAT) return online, businesses need to first register for VAT with the HMRC. Once registered, businesses will be given a VAT number and will be able to access their VAT account online. Businesses will then need to complete a VAT return form, which can be found on the HMRC website. The form must be completed in full and submitted online before the deadline.
It is important to submit a VAT return on time as late submissions can result in penalties. Furthermore, submitting a VAT return allows businesses to claim back any VAT that they have paid on eligible purchases. This can be a significant amount of money and so it is important that businesses do not miss the deadline.
Why it is important to keep on top of your VAT bill
If you are a business owner in the UK, it is important to keep on top of your VAT bill for a number of reasons. First and foremost, if you do not pay your VAT bill on time, you will be charged interest and may even be subject to penalties. Additionally, if you are found to have underpaid VAT, you will be required to pay back the amount plus interest and may also be fined.
Furthermore, it is important to submit your VAT return online as soon as possible after the end of each quarter as this will help reduce the risk of error and ensure that you are up-to-date with your payments. Finally, by keeping on top of your VAT bill and ensuring that you submit your return on time, you can avoid any potential issues with HMRC which could result in an investigation into your business.