[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

Re: VAT Setup

For many UK small businesses, the flat rate scheme is by far the most
efficient way to sign up for VAT.  You basically pick your industry and
instead of paying the normal rate, you just use the industry specific
rate on your net revenue.  If you the vast majority of your sales and
costs are vattable then you will usually end up ahead - on the other
hand if you do a lot of zero rated stuff or more than something like
half a million quid of business then you need to account for the
individual vat amounts

The technique I use is to have both a "vat collected" and a "vat paid"
account.  Sales go in one, costs go in another.  This means that at the
end of the quarter I can use the Trial Balance to check exactly what the
paid and collected amounts were.  I then net off both amounts into a
"Vat Control" account which accounts for the timing difference between
declaring and paying the VAT.  The final transaction is then "credit
checking account, debit vat control" to show the vat being paid (or
received back - wohoo!).

I find this very helpful because it automatically handles and highlights
any invoices which are posted back into a previous quarter (which should
be closed) and the difference between the VAT shown in the invoice
screen and the VAT in the "vat collected" column should either be zero,
or you have a basis to understand the discrepency.  This way it also
self rectifies through time

Good luck

Ed W