© 2009 Intellectual Property of Mike Perry - All rights Reserved :
Est. 2007
VAT - Background:
Value Added Tax is a tax on consumer expenditure – it is collected on business transactions, imports, acquisitions and services. Every sole trader or business with a turnover of £64,000 (0708) or £67,000 (0809)
must be VAT registered and pay VAT every quarter to HMRC, unless items being sold are Zero-VAT rated or you are specifically exempted. This is called Compulsory VAT. Standard VAT involves OUTPUT and INPUT
VAT where OUTPUT VAT is the VAT that you charge the customer for goods or services. INPUT VAT however is the VAT that your suppliers charge you for goods or services that they supply the business. VAT is
payable every quarter where the INPUT VAT is deducted from the OUTPUT VAT that you charged to give an overall figure of VAT amounts owing. This would then be paid to HMRC. In some circumstances the INPUT
VAT might exceed the OUTPUT VAT in which case you would ask HMRC to pay you the amount involved. KISSE will tell you how much if applicable. HMRC examine 20% of all Business VAT accounts every year
which means you would probably be called in once every 5 years. You would need accurate VAT records to show that your VAT procedures and calculations were accurately maintained. KISSE will do this for you.
This is the most commonly used form of VAT recording and payments.
There is also another method used for high turnover VAT payers called the FLAT RATE SCHEME. This scheme involves the trader paying a standard VAT % rate according to their trade group on all their turnover
amounts (Sales / Services etc). For this scheme HMRC are only concerned with your OUTPUT VAT where the reduced VAT % compensates the trader for loss of INPUT VAT that has been paid on all business
purchases and expenses. Payments to HMRC for this scheme are made monthly. This scheme is only beneficial to high turnover businesses but is much simpler to administer. KISSE will do this for you.
Note here that all sales / service items sold to your customers must have the VAT % associated with that item, that is either 17.5%, 15%, 5% or 0% and NOT the reduced trade group %. There are 3 types of VAT –
standard VAT of 17.5% (15%) that applies to most things, a reduced rate of 5% that applies to some items such as domestic fuel costs, and 0% items that apply to items such as books and food.
Please note that the newly applied 15% VAT Charges can be applied with the KISSE application: This will revert back to 17.5% as at 1st January 2010.
There are some disadvantages of paying Vat, these being…
Ø You are responsible for administering and recording all details, and for ensuring its accuracy. You act as an unpaid Tax collector for the HMRC.
Ø It might make you less competitive as similar items or services might be provided by Non-VAT registered traders.
The main advantage is that it might make the business out to be larger than it actually is, and gives it a more established credibility in the business and domestic community too.
Advantages of using KISSE for VAT processing 0809:
Once you have entered all your sales (turnover) and business expenses / Capital asset purchases (inclusive of VAT) the KISSE system will calculate all your VAT OUTPUT and
INPUT costs and will arrive at your quarterly VAT liabilities for Payment to HMRC. - or will identify any VAT owed to you by HMRC.
If adopting the FLAT RATE Scheme KISSE will work out all your monthly liabilities to HMRC - this means you do not have to submit details to accountants each month saving
you monthly processing fees - and also accommodates first year calculations if adopting the Flat Rate Scheme.
You will be able to see what your VAT liabilities are at any stage of your trading year as KISSE updates the system continually, where KISSE takes all the hard work out of
administering VAT returns. KISSE also takes account of VAT when working out all Capital Allowances. Capital Balancing charges and Capital Balancing Allowances.
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