by Eunice | Nov 28, 2022 | Uncategorized
TITLE: Must Know Facts about VAT Cash Accounting Scheme
The Cash Accounting Scheme lets you account for VAT (output tax) on your sales based on payments you receive rather than tax invoices you issue. The usual regulations call for you to account for VAT on your sales when you send a VAT invoice, even if your client has not paid you. This is different.
If you decide to use the program, you can only recoup the input tax (VAT) you paid once you have paid your supplier.
Even if you haven’t paid your supplier yet, you can still recover VAT from purchases you make using the standard way of accounting for VAT. In this blog, you will find out the VAT cash accounting scheme in a precise manner.
VAT cash accounting benefits
If you employ the “normal” VAT scheme, the date you issue an invoice determines how much VAT you are required to charge for goods and services.
Therefore, even if the bills haven’t been paid and haven’t reached your bank account, you must pay HMRC the remaining amount of any VAT you’ve requested every three months.
The same logic applies to any purchases you make for your company. Whether or not you have paid the invoice, the standard VAT system enables you to recoup any VAT that appears on bills owed to your business.
Only VAT that has physically changed hands is accounted for under the Cash Scheme; this is the date that your bills were paid or that you paid the invoices of other companies.
Eligibility of cash accounting
If you satisfy the following requirements, you may begin using the program:
- You anticipate that the value of your taxable supplies will be £1,350,000 or less in the upcoming year. For further information on calculating the value of your taxable supplies, visit our website.
- You have not yet submitted any VAT Returns.
- You haven’t been guilty of a VAT offence in the last year.
- You haven’t accepted a proposal to drop charges for a VAT infraction in the previous year.
- You haven’t received a fine for dishonest behaviour-related VAT avoidance in the previous year. You don’t owe HMRC any money, or if you do, you’ve devised a plan to pay off all of your outstanding VAT with them (including surcharges and penalties).
- If you haven’t received a letter from HMRC in the past year, the use of the programme will end. HMRC has declined to allow you to participate in the programme and has not contacted you.
- You follow the instructions given in this notice.
Cash accounting is not an option if:
- You haven’t submitted or paid your VAT returns on time.
- Having been found guilty of a VAT infraction
- Have paid a fine for VAT fraud in the previous year.
Joining the cash accounting scheme
Unlike many other tax-related products, you (or your accountant) won’t formally register your firm. Even though there is no necessity to register, you should only start accounting for VAT on a cash basis at the start of a new VAT quarter.
Leaving the cash accounting scheme
Only after a tax period can we discontinue using the cash accounting system. When you leave the scheme, you must start using the invoice accounting technique at the start of the subsequent tax year.
HMRC has comprehensive information about quitting the plan; however, consult an accountant if you have any questions.
Advantages and Disadvantages
Enrolling in this VAT plan offers various benefits for cash flow. For instance, you won’t be required to account for the VAT on any unpaid bills until you have received payment if a client is paying you slowly.
In reality, if you accumulate bad debts, the VAT component won’t ever need to be paid to HMRC.
Depending on your particular circumstances, there can be various drawbacks. For instance, if you buy a significant amount of goods on credit, you could run into issues since you cannot claim the VAT on any transactions you make.
Features of a cash accounting scheme
After configuring the system to be compatible with the VAT cash accounting scheme, you may do the following:
Report information about client payments received in the Payments section of the output file produced by the SAFT-PT: XML File Creation (RSAFT PT XML) report.
Once you have received payment from consumers, you may print payment receipts for them using the Payment Receipts: VAT on Cash (Portugal) (FIEUAR VAT RECEIPT) report.
Accounting for VAT when clients fail to pay
Which technique you select to account for your VAT will determine how you should address a bad debt, which is when a customer fails to pay you for a specific invoice.
If you use the cash accounting method, the VAT on the invoice is not due to HMRC until the client has paid you.
However, if you use the invoice accounting technique, the VAT would have been paid to HMRC in the quarter in which the invoice is raised.
Since your consumer won’t be paying it back to you, you can try to reclaim the VAT from HMRC as bad debt relief, but there are limitations.
For instance, even if you know before that time that your client won’t pay you (for example, if they’ve gone into liquidation), you may only claim back bad debt relief on obligations over six months old.
Conditions you must meet
You must typically occupy it for at least two years and use it for the entirety of your business (unless you exceed the turnover limit). However, if you are not benefiting from the plan or your accounting system cannot handle the criteria, you are free to exit anytime.
If you want to use the scheme, you can only reclaim the VAT incurred on your sale when you have to pay the supplier for the simple payment method if you can track your invoice of purchasing the goods or services.
Frequently Asked Questions
What documents must I maintain?
The primary accounting document will be a cash book that includes a distinct column for the applicable VAT and summarizes all payments made and received. Additionally, you must maintain the related tax invoices and ensure an effective mechanism for cross-referencing. Unless you and HMRC have agreed to a shorter time, you must keep these VAT records for a minimum of six years.
How about part payments?
Whether it is a partial or payment in kind, you must account for VAT each time you receive or make a payment. Typically, the VAT portion (now 1/6th) will be used to determine the VAT. A fair and reasonable apportionment must be used if there is a mixed supply at various rates.
by Eunice | Nov 26, 2022 | European VAT
TITLE: Things You Have To Know When Handling VAT in the UK: When To Get Professional Assistance
Businesses need a clear transparent pricing plan to excel in the market line. Suppose you possess a certain e-commerce business and want to excel with a VAT invoice, approach the VAT officers about your tax advantage. In this blog, you will learn about the right time to visit a tax adviser and the services you will get after registration.
You will also need guidance and assistance from a tax accountant on how to manage VAT-related concerns. However, you are not required to do so, and even if you do, it is still your responsibility to ensure that your VAT affairs are accurate (taxpayer).
What is VAT in the UK?
VAT is a tax on a consumer’s expenditure. It is gathered through commercial transactions, imports, and purchases. Most commercial deals involve the supply of goods or services. If the supplies are produced by a taxable person or in furtherance of their business, VAT is required.
When to visit?
This depends on your company’s size, complexity, history of legal compliance, frequent visits to businesses that send claims and payments that are erroneous or delayed. Ensuring your claims are accurate from the outset is, therefore, in your best interests.
HMRC will decide on a mutually agreeable time and day prior to the visit. On occasion, a VAT representative will call you without an appointment. Examining the company’s ongoing operations may be one explanation for this.
Visit Length
The complexity of the enterprises influences the length of the visit. Officers work to cause you little disruption while performing their duties. A visit to a small business might take a few hours or two or more days for a large or sophisticated business.
What are accountant firms responsible for, and how do they assist?
You can plan which countries require VAT registration and determine how much tax to pay in each nation to comply with the requirements by tracking your sales data in various countries through your sales channels.
Organisations make finding a local auditor in each nation easier by providing one point of contact and a straightforward price structure due to language hurdles, ambiguous costs, and various time zones so that you can concentrate more on expanding your business.
Accountant firm’s role
They can guide you in registration and track your revenues to illustrate a pure idea of tax amount and requirement. Consulting an accountant firm saves precious time finding a local accountant for the pricing plans.
Accountant firm and how they assist
Accountant firms advise businesses about VAT matters and current or former tax officials. They efficiently take care of all your VAT submissions and registrations in the UK and throughout Europe.
Difference between accountants and tax advisers
Accountants hold a major responsibility in the finance department and perform major functions like calculating and submitting the VAT return, maintaining annual accounts, filing self-assessment tax and VAT, and forecasting and monitoring cash flow.
At the same time, a tax advisor is someone who has taken steps to develop a specialisation within the area of taxation. They devote a lot of work to staying current on the latest tax laws to create a smart approach to reduce the amount of taxes owed.
A tax adviser’s level of expertise in tax issues is more than an accountant’s level of expertise. Because of this, it is appropriate for anyone seeking intricate tax counsel for difficulties involving their taxes or more complex business taxes.
Scope of work that does not require accountants to be involved
Your credit charges will be excluded from VAT if you fund your credit and declare it to your clients as a separate payment. You are not required to employ an accountant in this situation.
The given goods will be taxed on the consumers’ account if you deliver them on interest-free credit by agreeing with your clients that they will pay for the goods without interest within a particular period. No VAT-free deposit is offered because there is no fee for the credit.
Unless the agreement clearly states that such fees are connected in whole or part to the delivery of goods, all relevant premiums for credit are cancelled. VAT is not applicable if delivery is attached to a letter of payment, typically displayed as a handling charge, document fee, or receipt fee.
For further details and services, you can visit our site https://sterlinxglobal.com/
Best accountant firms in the UK
Best accountant firms in the UK have been discussed below with a wide variety of services they provide.
1. Deloitte
With a £4.5 bn turnover, Deloitte is the largest accounting business. Deloitte facilitates connections and helps with advanced tax, audit & assurance, and financial advising services.
2. PWC
PwC, with 24,207 workers, is the largest accounting firm. They provide various tax services at every point of their life cycle, including growth, succession, and beyond, from personal to business wealth.
3. EY
By providing a fundamentally different method of tying together strategy, transactions, transformation, and technology, where design and delivery inform one another at every stage, EY can assist you in realising your goals. EY provides a wide range of services, including tax compliance, tax planning, and various private tax services.
4. Sterlinx Global
Sterlinx makes accounting easy for start-ups and growing businesses. With 15 years of experience behind them, they tailor-fit their accounting services to your business needs. They monitor your tax liabilities and due dates to ensure that you are fully up-to-date with your returns. You can trust Sterlinx to take care of your accounting so you can focus on growing your business.
Frequently Asked Question
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Should I appoint a tax adviser or accountant?
It is based on the situation you are facing. If you are going to start a business, you need to appoint an accountant to help with all the business’s financial concerns, as well as the tax planning and compliance services you currently require. However, if you find it difficult with your tax affairs, a tax adviser is more likely to provide more detailed knowledge that could lead to a greater analysis of tax compliance and savings.
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What is the difference between an accountant and a tax accountant?
Financial statements can be compiled and prepared by non-CPAs; however, CPAs can also help their customers with IRS audits. Tax accountants help people and organisations with estate planning and financial planning in addition to tax preparation.
by Eunice | Nov 24, 2022 | E-Commerce
Accounting and Bookkeeping should be the least of your worries with us.
Trying to make the most of her time at home, Cass, a stay-at-home mum with a passion for arts and crafts, decided to start up a small crochet Amazon business. When friends and family shared her creations online, orders quickly started coming in. She finally decided to put her business up on Amazon to maximise her business potential. Soon after, her business started getting attention on the platform. With a lot of work on her hands, she realised she needed help in tax accounting and much more.
Online businesses set up on Amazon might look easy to manage. However, it is complicated to keep up with your listings, manage orders and deliveries, keep up with the demand, and manage finances.
In Cass’ case, as a stay-at-home mum, she had all the time in the world to manage her production with the help of her loving family.
However, it was crucial to understand that managing businesses means you need to know and handle your business finances well. Cass needed help in tax accounting. With the current platform, she sold her products on, an accountant who is an expert at amazon accounting would save her from a dead end.
Cass knew early on that her business would be a long-term commitment. She had no problems with the bulk of orders since her family helped her make it through production.
Later, as her business grew, she experienced what other sole business owners would. She was finding it hard to keep up with tracking her expenses, from purchasing raw materials to managing product deliveries and her finances. She was already a hands-on business owner; managing tax accounting would be another burden for her to bear.
Knowing what trouble it would be to continue doing her own Amazon accounting, she started looking for help to ease up her problems.
She knew that hiring an Amazon accountant would add to her overall business expenses. But the risk was just too high; a jeopardised business with mismanaged finances and taxes would be dangerous.
So, she continued looking for a firm that would see her as an essential part of the business community, no matter her business’s size. She was running out of choices and needed help. She soon found out about the Amazon Accounting and Bookkeeping services Sterlinx offers.
Thankfully, Sterlinx Global had the perfect skills to help her manage her finances and tax accounting.
Like any Amazon seller, Cass needed an Amazon accountant to help her manage her tax accounting, tax filing, VAT calculations, self-assessments, and e-commerce accounting. Sterlinx Global were well acquainted with what she needed, so they provided her with a well-equipped Amazon accountant.
Sterlinx’s services did not just help her manage her taxes and business financing well. She also received reminders of her tax deadlines so that she would not miss any. She also got sure evaluations of how much her e-commerce business was growing, which helped her make crucial business decisions that capitalise on her online store’s growing popularity.
Now provided with the help she needed, Cass became the hands-on business owner she wanted to be, with an Amazon accountant at her back to manage the finances.
If you need a tax accounting expert’s help or are searching for an Amazon accountant and bookkeeping services, we would be glad to help you. We at Sterlinx are committed to doing what is best for every business owner.
Our team of AAT and ACCA-qualified accountants will take care of your accounting needs while you continue managing your business with no worries. We handle Bookkeeping, Payroll, VAT, Self-assessments, and Digital documentation for E-commerce Accounting and Xero training. We take on every case with a comprehensive approach.
No matter the business’ size, we know every case has specific needs and we prepare for a personalised approach. We are problem solvers here at Sterlinx, and we see no problem without solutions. Our team of tax accounting specialists will help you grow. Contact us now.
by Eunice | Nov 22, 2022 | European VAT
TITLE: VAT Invoices Guide for UK Businesses: How to Handle VAT Invoices
Smooth business functions require proper record keeping and handling, and VAT records are no exception. VAT Invoices are essential records that hold significant financial value, particularly in the case of reclaiming the VAT amount. Therefore, knowing when and how you, as a business entity, are required to charge VAT is important.
This blog clarifies all the details associated with Invoicing requirements according to UK VAT laws. For this purpose, the matters of issuing VAT Invoices to local and foreign businesses have been covered.
VAT Invoice Requirements
VAT Invoices hold important fiscal value and are used for accounting purposes. As a VAT-registered business, it is crucial for you to keep Invoice records. They are issued to the concerned clients and allow the recipient to reclaim VAT.
UK has followed the country’s VAT regulations since Brexit. Both the UK and the European Union have declared their own VAT requirements associated with when and how a business must issue a VAT Invoice.
The businesses that operate in the UK and the ones that trade between the UK and the EU might find this article interesting.
VAT Invoice Requirements – UK Businesses
UK VAT laws have categorized the supplies into three groups. VAT is charged on the items differently according to the category they might fall under. These categories are standard-rated, reduced-rated, and zero-rated (See FAQs).
Also, the supplier and recipient both must be VAT registered in order to issue the VAT Invoices.
Moreover, three forms of VAT Invoices, namely simplified, modern, and full, can be issued to the clients based on the total amount of sales that have been generated. The following subsections are dedicated to further elaborating the requirements.
UK VAT Invoice – When
According to the government of the UK, VAT Invoices are issued only when the supplier delivers goods and services that fall under the standard rated and reduced rated category.
If the supplies are zero-rated or the recipient is not VAT registered, then it is not necessary to issue the invoice.
However, there exist exceptions. VAT Invoice can be issued for the clients who ask for it since it cannot be checked if they are VAT registered. VAT Invoices are not necessary in the cases of self-billing, authenticated receipts, the gifts of goods.
UK VAT Invoice – How-To
According to the UK government, there are two possible ways to issue a VAT invoice. You can either issue them electronically or as a paper document. As per governmental advice, the electronic method is prioritized since it is more manageable.
However, the stakeholders must be mindful of the security of the electronic document.
VAT Invoice Requirements – Trades between EU and UK
In the post-Brexit situation, businesses headquartered in the UK are not required to charge VAT on services they sell to European countries. Therefore, the Invoices consisting of VAT amounts are not required to be issued to such customers.
Selling to EU Businesses
It is to be noted that England, Scotland, and Wales are not part of the EU after Brexit. However, Northern Ireland is still a part of the European Union.
Therefore, businesses based in Great Britain must not charge VAT to European clients. Consequently, there is no need to include VAT Invoice.
On the contrary, Great Britain-based businesses are required to observe other obligations if they choose to sell abroad to EU clients. Such companies are required to obtain the EORI number in order to generate sales abroad.
Moreover, they must also consider the requirements associated with the customs.
However, Northern Ireland Businesses may continue charging VAT similar to the pre-Brexit era. This is because they are still part of the EU regulatory frameworks and, therefore, may follow the EU VAT rules.
Moreover, if such businesses intend to sell items to UK-based clients, then they shall follow the UK’s VAT regulations.
Purchasing from EU Businesses
In case of purchasing from an EU business, the UK-based clients shall be required to consider paying the import VAT. In such a scenario, the buyers would be required to acquire the C79 certificate.
This certificate shall authenticate all the VAT payments observed by the buyers and allow them to reclaim VAT.
VAT Invoice Requirements – International Trade
International trading includes dealings with foreign languages and currencies. UK government has laid out specific rules for the businesses involved in such matters.
International trade – VAT Invoice and Foreign Languages
The government of the UK allows businesses to issue VAT Invoices in foreign languages. However, if the HM Revenues and Customs department require the English translation, then it would be necessary to provide them with it within 30 days.
International trade – VAT Invoice and Foreign Currency
In the case of selling products from UK based location, if the VAT invoice is issued in the foreign currency, then the respective business must consider converting the VAT amount into sterling.
Frequently Asked Questions
What is the categorization for VAT rates?
VAT rates are applied according to four categorical types. These are divided according to the type of item being sold.
- The standard rate. A 20% VAT is charged. This rate is applied to all the general items.
- Reduced rate. A 5% VAT is charged. It is charged on the items for children and old citizens.
- Domestic fuels and power supplies are also included in this category.
- Zero rates. A 0% VAT is charged. This rate is intended for children’s wearables, books, exports, food, etc.
- Exempt. VAT is not applied to financial properties, insurance, sports, medical, and similar transactions.
When can you issue a simplified invoice?
A simplified invoice can be issued if all of the below conditions exist:
- the value of the supply is £250 or less
- your customer agrees to a simplified Invoice
- if your business is based in Northern Ireland, your customer must not be from an EU member state
Can I issue an electronic invoice?
Invoices can be issued or received electronically rather than on paper. This is known as electronic invoicing.
Conclusion
VAT Invoices are important financial records. They are issued according to UK VAT laws. They are required to be issued to the clients who ask for them. Moreover, they can be issued through paper or online media.
All the selling and purchasing that takes between the EU and UK are now governed by the post-Brexit regulations and must be handled accordingly.
by Eunice | Nov 19, 2022 | EU VAT Updates
Interested in expanding your market reach to Austria? Let these eight surprising facts on Austrian VAT help you navigate the challenges of tax compliance.
A Guide on Austrian VAT
Tapping into the Austrian market is an excellent growth opportunity for your company. However, doing business in an unfamiliar landscape can be tricky, particularly regarding local tax legislation. Here are key insights about VAT in Austria.
1. VAT Rates Vary
As a member state of the European Union (EU), Austria follows the EU’s directives on VAT. It is free to set the standard or upper rate as long as it is not less than 15%. The country’s VAT currently stands at 20%, applicable to most goods and services, but it was temporarily reduced during the COVID-19 pandemic.
However, not all areas in Austria follow the standard rate. In the town of Jungholz and the Mittelberg municipality, their consumption tax is lower at 19% since they are located in the German region but remain under Austria’s jurisdiction.
Like most countries, Austria has a tiered VAT system. It has reduced rates of 13% and 10% for certain products and services but also applies a zero rate and exempts specific services from VAT.
Because of the different VAT rates, knowing the correct one to apply can be tricky. You are liable for the uncollected difference when you charge the wrong rate, not your customer.
Avoid such costs by consulting with an accountant or tax adviser specialising in Austrian taxation. Let a professional from Sterlinx Global assist you.
2. There’s No Need to Set Up a Local Company
Non-resident businesses may register for Austrian VAT without establishing a local company. This simplifies declaring and collecting taxes from transacting parties, especially overseas enterprises.
To be VAT-registered in Austria, you must submit the duly accomplished registration form to the Graz-Stadt tax office along with the following documents:
- A copy of the Articles of Association
- An extract from the business’s trade register
- VAT certificate if registered in other EU member states
- Proof of economic activity in the country
You can download the VAT registration form from the Ministry of Finance website. Once registered, you’ll receive a unique 9-character ID starting with a ‘U’ and followed by a string of 8 digits.
3. A Fiscal Representative Is Required
When registering for Austrian VAT, non-EU companies must have fiscal representation to do so. They should appoint a local agent, such as an accountant or tax advisor, to facilitate the registration on their behalf. In this case, you also have to execute a power of attorney.
Besides registering, the appointed fiscal agent will manage your VAT obligations and handle relations with tax authorities in Austria. That’s why some fiscal representatives ask for a deposit—like a bank guarantee—to ensure a smooth working relationship.
4. Mind the Lower Thresholds for E-commerce
The EU’s VAT system, including Austria’s, was outdated to keep pace with the steady growth of online retail, which was further accelerated by the COVID-19 pandemic.
To ensure that VAT due on these sales is collected and paid to the proper tax authorities, the European Commission issued revised VAT rules on cross-border e-commerce sales.
Beginning 1 July 2021, the country-specific turnover threshold for VAT registration was abolished and replaced with an EU-wide floor of €10,000. If you’re a non-EU online seller with Austrian buyers, register for VAT at the onset in anticipation of annual sales exceeding the limit.
Moreover, all goods imported into Austria and other EU countries are subject to VAT—the tax exemption was abolished to prevent abuse from sellers outside the EU. They often understate the value of goods sold to less than €22 to avoid taxation.
5. You Only Need to Register in One EU Member State
Another significant reform with the revised rules is that e-commerce businesses can register in only one EU member state but can declare and pay VAT from customers as long as they’re within the EU.
For example, if you obtain an Austrian VAT tax number, you may use it to settle collected VAT from your cross-border online sales in Belgium or Cyprus. You don’t have to be VAT-registered for each country you sell to.
The rationale behind streamlining registration is to simplify doing business in the EU and minimize fraud by reducing red tape. Also, it aims to improve VAT payments by overcoming barriers through digital technology.
6. IOSS Simplifies VAT Declaration and Collection for Distance Sales
The Import One-Stop Shop (IOSS) was another measure introduced to ease VAT collection on online sales from third territories or non-EU countries like the UK. IOSS is a web platform for imported items valued at €150 or less.
Thanks to the electronic portal, you don’t have to keep track of the different standard VAT rates in each country. While the IOSS offers convenience to entrepreneurs like you, it doesn’t eliminate the fact that you still have obligations to meet as VAT-registered.
7. As VAT-Registered, You Have Obligations
When registered for Austrian VAT, your primary responsibility is filing periodic returns on covered transactions. The frequency, however, depends on the previous year’s annual turnover.
You must file preliminary returns monthly if you recorded yearly sales of more than €100,000. On the other hand, businesses with turnover below €100,000 may submit VAT returns quarterly.
Returns must be filed electronically by the 15th of the second calendar month following the covered tax period. It is also the VAT payment due date. For example, the tax charge for June should be settled on 15 August, and the corresponding return should be filed no later than 15 August.
You are obliged to file VAT returns via Austria’s electronic portal, FinanzOnline. If you are unable to do so due to lacking technological resources, you may submit using the official form U30. When filing returns through a tax representative from Sterlinx Global, the requirements relating to them will apply.
8. VAT Compliance Can Be Complicated
Complying with Austrian VAT legislation is never a straightforward matter. There are instances when reforms are implemented, and keeping track of the changes that apply to your business can be confusing.
Non-compliance, such as late VAT return filings or incorrectly declared transactions, results in the following penalties:
- Late payment: 2% of the VAT payable
- Late filing: 10% of the VAT due
EU member states often have different deadlines for paying VAT due and filing corresponding returns.
