16 Oct Common VAT Mistakes
Even if you have a clear system for monitoring VAT administration, and staff trained to use it, in reality, you are susceptible to slip-ups, especially at times of pressure.
Errors can slip through that could be insidiously costing your company money. Worse still, you could be risking additional tax bills and penalties.
This is why seeking VAT advice and streamlining processes on cloud-based systems makes financial sense, as well as saving you time and stress. Here are just a few common VAT mistakes that can trip up unsuspecting companies.
It’s all in the timing
Keeping accurate records is vital, including being organised to collate properly dated input. Did you know that you need the date of supply on each invoice, which is often not the same as the date of sale?
Also, make sure you collate timely records, providing sufficient evidence to support VAT reclaims – which means keeping on top of receipts, rather than scrabbling around for them further down the line.
Complexities of rules
It’s surprising how many people believe they know the rules of VAT calculations, only to find they have knowledge gaps or misconceptions when challenged.
For example, are you 100% sure of the VAT rules for business entertainment, company cars and fuel?
Did you know that VAT can only be claimed for a vehicle used exclusively for business purposes and therefore not available for anyone’s private use?
It may also come as news to you that one of the first things HMRC may look at is if you are inappropriately claiming VAT back from customer entertaining – though you can claim VAT back for entertaining your staff.
One common grey area for smaller companies is the VAT rules when trading internationally. This area is far from simple, and much depends on the specific country you are doing business with. Don’t be fooled into thinking buying from abroad always exempts you from VAT.
This may sound like common sense to you, but it is another complexity that trips up many firms. If you supply goods or services that are exempt from VAT, your company is not able to reclaim VAT on purchases related to those particular products or services.
The last one comes down to simple human error.
If you have ever entered the wrong figures on VAT returns, you are certainly not alone. It is why it is so important to have checks and measures in place, because that one moment of inattention could cost you dearly.
These mistakes are just the tip of the iceberg, so for help with VAT registration and some expert VAT advice for companies already registered, contact us today.