VAT accountant in Watford for registration and VAT returns

Knowing when you have to register

You must register for VAT if your taxable turnover goes over £90,000 in any rolling 12 month period. Rolling means you look back over the last 12 months at the end of every month, not just at your financial year end. Once you cross the line, you have 30 days from the end of that month to register.

There is a second test that catches people out. If you expect your turnover to go over £90,000 in the next 30 days alone, for example because a single large contract is about to be paid, you must register by the end of that 30 day period. Registering late does not get you out of the tax. HMRC will want VAT on your sales from the date you should have registered, and a penalty may be added.

We keep an eye on rolling turnover for clients who are getting close, so the decision is made calmly rather than in a panic.

Choosing to register before you have to

Some businesses register voluntarily. If most of your customers are VAT registered themselves, adding VAT to your invoices costs them nothing in the end, and you can reclaim VAT on your own costs. A trade supplier on Watford Business Park selling mainly to builders is a good example.

It works less well if you sell to the public. A hairdresser in Bushey or a tutor in Croxley Green would usually have to absorb the extra 20% or raise prices. On registration you may be able to reclaim VAT on goods you still hold that were bought in the previous 4 years, and on services from the previous 6 months, which can soften the cost of starting.

VAT rates and schemes in plain terms

Most goods and services are charged at the standard rate of 20%. Some items, such as household energy, are at the reduced rate of 5%. Others, including most groceries and children's clothes, are zero rated, which means VAT is charged at 0% but still counts as a taxable sale. A few things, such as many financial and property transactions, are exempt altogether.

On top of the rates, HMRC offers schemes that change how and when you account for VAT. We look at your sales, costs and cash flow, then recommend one.

• Cash accounting, where you pay VAT when customers pay you, not when you invoice
• Annual accounting, with one return a year and advance payments through the year
• Flat rate, where you pay a fixed percentage of turnover, with a higher rate for businesses that spend very little on goods
• Margin schemes for second hand goods, antiques and similar items

How we prepare and file your VAT returns

VAT returns must be kept and filed digitally under Making Tax Digital, unless HMRC has agreed an exemption. That means compatible software, not a paper form or a figure typed into a website. Each return, and the payment, is normally due one month and seven days after the end of the VAT period.

Before we file, we check the figures behind the return. Is VAT being reclaimed on business entertaining, which is not allowed? Has VAT been claimed on a car with private use? Have builders' invoices been treated under the domestic reverse charge, where the customer accounts for the VAT instead of the supplier? Those three cause more errors than anything else we see.

Late returns now build up penalty points, and once you reach the threshold for your filing frequency a financial penalty follows. Late payments bring their own penalties and interest. Records behind your returns must be kept for at least 6 years.

Why local firms use a VAT accountant in Watford

A lot of the VAT work we do comes from businesses whose trade has a quirk. Builders working across Hertfordshire deal with the reverse charge. Retailers near Harlequin Watford may sell a mix of standard rated and zero rated goods. Online sellers can have customers abroad, which brings export rules and evidence requirements into play.

Having a VAT accountant in Watford who knows your type of business means those details are dealt with as routine. We also act for clients in Radlett and Harrow, and nearly everything is done online, with a meeting at our Watford office if you want one.

Putting right a VAT mistake

Errors happen. Smaller mistakes can often be corrected on your next VAT return. Larger ones need a separate disclosure to HMRC. HMRC says it wants to encourage unprompted disclosures, made before it has any reason to look, so it pays to act early. We work out the size of the error, prepare the correction and explain what to change so it does not happen again.

If your turnover falls and is expected to stay below £88,000, you can ask to cancel your registration. VAT may be due on stock and assets you keep, so it is worth working out that figure before applying.

Common questions