A helpful VAT Guide for Small Business Owners, Contractors and more

VAT Guide - Standard VAT Accounting

Being VAT registered means you can reclaim VAT on purchases that you have been charged VAT on. Using the standard VAT accounting method means that every quarter you would be required to fill in a standard VAT return form (online only). This must include:

All output tax – this is the VAT which you have charged to customers/clients on your invoices in the relevant quarter. Whether you have or have not received payment for the goods/services provided, you still must add this to your VAT return form in that quarter.
All input tax – this is the VAT which you have been charged by suppliers on goods or expenses your business has incurred during the relevant quarter. Again whether or not you have paid for the goods or expenses you must add this to your VAT return form in that quarter.
Using this method means that you would ask to reclaim VAT based on the date of your raised invoice rather than the date the invoice is paid for. For example - if you were completing a VAT return form for the first quarter ending March:

Date invoice raised 11th March
Date invoice paid 12th June
Date to file and pay your VAT March (First quarter)


You must include the invoice in the quarter the invoice was raised not the month the payment was received.

Remember...

You do not have to register for VAT until you reach the £70,000 (2011/2012 tax year) threshold within a 12 month period of your business starting – once this amount is reached it is mandatory to be VAT registered.
Some companies voluntarily register for VAT – this could be for many different reasons; customers will only do business with VAT registered companies or you may be looking to purchase many goods where VAT is chargeable and can be reclaimed.
Standard VAT is currently 20% (2011 rate).
Advantages of using Standard VAT Accounting
Even If you have not paid for goods purchased, you can still reclaim the VAT from HM Revenue and Customs in the quarterly VAT return, great for your cash flow.

Disadvantages of using Standard VAT Accounting
You have to pay VAT over to HMRC for service or goods sold which you may have not yet received the money for, not great for cash flow especially for new businesses.

For more information and help on VAT, visit: http://www.sjdaccountancy.com/about/vat_guide.html