Tribocon outsourced VAT return basics as follows:

VAT return basics

VAT stands for Value Added Tax. As the name suggests, it’s collected at any time value is added to a product. Businesses generally have to pay VAT to Her Majesty’s Revenue & Customs (HMRC) when they sell or hire out goods or services. There are some exceptions, such as sales outside the UK. But for many businesses, VAT applies to every sale.

It doesn’t matter if your customer is another business or a consumer. However, as a business, you can reclaim VAT that you pay on business expenses – so long as you’re VAT registered.

The VAT return summarises your sales and purchases and the VAT relating to them. All the information you need should be in your VAT records.

The VAT return includes your sales total (excluding VAT) and output tax – the VAT you charged on these sales and which needs to be paid to HMRC. This also includes VAT due on any other taxable transactions, for example, if you barter goods or take them for personal use.

The VAT return also includes details of your total purchases (excluding VAT) and input tax -the VAT you have paid and can reclaim. If you make any sales that are exempt from VAT, you will not usually be able to reclaim all the VAT you have paid. Other purchases where you cannot usually reclaim VAT include most car purchases. You can’t reclaim VAT if you do not have a VAT invoice to prove you paid it.

A summary of any trade with other European Union (EU) countries must also be recorded on the VAT return. UK companies can generally reclaim VAT on imports from the EU, but VAT is charged and accounted for differently.

Tax points, VAT periods, and VAT returns

UK VAT-registered businesses complete a VAT return for each VAT period. VAT periods are typically quarterly, though you can ask for a non-standard VAT period. For example, a business that regularly reclaims VAT from HM Revenue & Customs might boost its cash flow by completing monthly VAT returns. UK businesses can also ask for quarterly VAT periods that match their financial years. Smaller businesses can simplify their VAT accounting by opting for the annual accounting scheme.

Your VAT return summarises all the transactions that took place during that VAT period. For VAT purposes, the transaction date is determined by the ‘tax point’. The tax point is normally, but not always, the date on the VAT invoice. However, if:

• there is no VAT invoice (eg with typical retail sales), and the tax point is normally the date of supply
• payment is made in advance, the tax point is the earlier of the date of payment, and the invoice date
• the VAT invoice is issued more than 14 days after the date of supply, the tax point is the date of supply

There are special tax point rules for situations such as part payments, in some industries and for some VAT accounting schemes. You may want to take advice to ensure you understand what tax point to put on VAT invoices you issue and what to include in your VAT return.

Online VAT returns are due one month and seven days after the end of the VAT period. Payment of any VAT owed is due at the same time, although HMRC will collect direct debit payments three days later.You can work out your VAT payment deadline using the GOV.UK calculator.

Different VAT Schemes Available

Standard VAT Scheme

The scheme that everyone has heard of is the Standard VAT Scheme. The scheme is based on when the invoice is raised. So when you raise a sale invoice, it would automatically be included in the next VAT return. This is fine if you have customers that pay on time but if you struggle with slow-paying customers, then you might find you have cash flow issues, being on this scheme, as you will be paying HMRC well in advance of receiving payment.

paying customers, then you might find you have cash flow issues, being on this scheme, as you will be paying HMRC well in advance to receiving payment.

The Standard VAT Accounting Scheme follows the principles of accrual accounting – meaning that financial activities are reported as they occur, regardless of when the payment is completed.

Within the Standard VAT Accounting Scheme, financial activity is considered to occur on the date a VAT invoice is issued. Income is reported when you raise an invoice for a customer and expenses are reported when you receive an invoice from a supplier.
As such, when filing a VAT Return using this scheme, VAT correlates to the quarter in which an invoice is received or raised, regardless of whether you make or receive payment in a different quarter.

Annual accounting VAT scheme

This is just like the standard VAT accounting method, except that you don’t fill in quarterly returns. Instead, you have an annual VAT reporting and payment deadline. Some businesses keep this the same as their corporation tax filing date, for simplicity. 

Once you complete the VAT return, you start making quarterly interim payments for the VAT you estimate that you’ll owe. This method allows you to budget more carefully and because payments are spread throughout the year, it’s often better for cash flow. However, you may end up over-paying or underpaying HMRC at times, so you may be required to make a final balance payment or apply for a refund. Businesses with annual turnover above £1.35 million can’t use the annual accounting scheme.

VAT Cash Scheme

This scheme is based on when a business pays and receives money, rather than when the invoice is raised. This is a good scheme for businesses who have slow paying customers. The VAT return is based on a list of receipts and payments. So the business accounts for VAT on sales, only after receiving payment. This can ease the cash flow for many businesses. Any business with a turnover under.£1.35 million can join the scheme and must leave the scheme if the turnover reaches £1.6 million.

Please be aware that if a business changes VAT schemes, there will be accounting adjustments that will need to be made, in order to ensure that VAT is accounted for correctly. For example, if a business moves from the VAT standard scheme to the VAT cash scheme, outstanding customer and supplier balances will have already been accounted for in previous VAT returns and will need to be adjusted for in subsequent VAT returns.

You can use this scheme in combination with the annual accounting scheme but not the flat rate scheme.

Flat RATE Scheme

Designed to encourage small businesses to register for VAT, with this scheme, you charge VAT at the appropriate rate but pay VAT to HMRC at a lower rate. Your business’s turnover must be less than £150,000 to qualify for the flat rate VAT scheme.

The big advantage of this scheme is that you don’t have to keep a record of the VAT you charge on every sale or pay VAT on every purchase. Instead you can calculate your VAT payments as a percentage of your total VAT-inclusive turnover, which makes it easier and quicker to do your VAT return.

You don’t have to work out how much VAT you spend either. Instead the percentage rate you apply –  typically between 9% and 14% depending on industry sector – is designed to take account of the VAT you have spent.

From 1 April 2017, a new flat rate percentage was introduced for limited cost businesses. These are businesses whose expenditure on goods is less than either:

• 2% of their turnover
• £1,000 a year (if costs are more than 2%)

For some businesses it may be unclear if they are a limited cost business, especially if goods are close to the 2% threshold. It is likely to affect you if your main costs are services, vehicle or fuels costs, or if you do not purchase many goods.
To make this simpler HMRC has developed an online calculator to help businesses work out if they are eligible to pay the higher rate. The calculator can be used each time a VAT return is completed to clarify any uncertainty.

This flat rate scheme can be used with the annual accounting scheme. As it contains its own cash based method of accounting, it cannot be used with the cash accounting scheme.

VAT Frequencies

Another area that may be of interest is knowing your choice in when you report your vat returns. Many businesses opt for a quarterly vat return. But a business can also choose to have a monthly vat return or a yearly one. HMRC can insist that a business uses a monthly reporting frequency if the owner had previously had a business that went bankrupt, owing HMRC money. As some people seem to make a career out of running a business for a while, then bankrupting it and moving on to set up another one, HMRC make impose rules on such a business, insisting on a monthly vat return to have an up to date view of the business at all times. HMRC can also impose a bond before the business can begin trading too.

What about the yearly vat return? This is based on the previous year’s trading and the business is expected to pay a regular amount towards their final vat return. If the trade is significantly different to the previous year, the business can contact HMRC and adjust the payment scheme to fall more in line with the current trading year. When the yearly vat return is completed, the balance will be paid over to HMRC and then the process starts again.
Businesses can also ask HMRC to align their vat return reporting period in line with their financial year end. This makes it easier for the accountant to reconcile the vat account at the end of the year, whilst preparing the accounts. This can be done whilst registering for VAT.

Tribocon can provide an outsourced VAT return basics service as follows:

We’ll prepare, review, and file your sales tax returns. 

We’ll get the report ready and help you prepare for the cash payment that’s due. Filing a correct sales tax return requires accuracy. It’s vital that you do not pay more in taxes than is necessary. It’s also important that you file and pay on time to avoid penalties and interest.  

What You Get with Sales Tax Filing Services:

• We will review your transactions each period and determine liability.
• We will prepare the sales tax return.
• The cash requirement will be sent to you for approval.
• Once approved, we will file the return with your state

SALES TAX

There is no federal sales tax in the United States, but the majority of states do impose local sales tax on consumer purchases. Taxes can range from 0% to over 8% of the purchase price. The amount of the sales tax varies widely from state to state and differs based on the type of goods or services being purchased. For example, some states do not have sales tax for food or clothing purchases, while others may have sales tax for both.

Sales tax is governed at the state level.

There’s no federal sales tax in the United States. Instead, each state makes its own sales tax laws. That means U.S. merchants that work around the country can find themselves dealing with 46 different sets of sales tax rules and regulations. (Five states don’t have statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon.)

Some items are taxed differently.

In the U.S., most tangible personal property, like a lamp or a toothbrush, is considered taxable. But some items, usually those considered necessities, are not taxable in some states.

For example, clothing isn’t taxable in Pennsylvania, textbooks aren’t taxable in Kentucky, and groceries aren’t taxable in most states. (As opposed to “prepared food,” which is almost always taxable.)

In other cases, these items are taxed at a different or reduced rate. For example, in Illinois, groceries are taxable at a reduced rate of one percent. And in New York, clothing items priced at $110 or less are non-taxable.

Sales tax filing due dates differ from state to state.

Remember how states all have different rules for sales tax? Never is this more apparent to retailers than when it comes time to file their sales tax return.

In most states, sales tax is due on the 20th day of the month after the taxable period ends. However, plenty of states break from that rule: Sometimes sales tax is due on the 15th of the month, the last day of the month, or some other date.

The frequency at which you are asked to file a sales tax return and remit sales tax also varies from state to state. As a rule, the more revenue you make from buyers in a state, the more often the state wants you to file and pay sales tax. States use sales tax revenue to pay for budget items like schools, roads, and public safety, so they want as much sales tax in their treasuries as quickly as possible.

Sales tax is usually due either monthly, quarterly, or annually, with high-volume sellers paying monthly and the smallest-volume sellers required to file and pay only once per year. Of course, in keeping with the tradition of every state doing sales tax its own way, some states have other frequencies, such as “semi-annual” or “fiscal annual” frequencies.

Sales Tax Rules 

Sale Tax depends on three main factors: your nexus (or which states you have a connection with – you are only liable to pay tax in states that you have a connection with), the products or services in your product catalog (different tax rates apply to different products) and when you are exempt from taxes (this can differ from state to state as well).

Nexus and Registration

The first step is to figure out which agencies and consequently, which states, you are liable to pay taxes to. This depends on which states you have a connection to (whether that connection is physical – like a warehouse where you are storing goods or non-physical – like a contact that helps contribute to your sales).

Your company’s connection with a state is called nexus. Nexus is the benchmark that determines whether your company can be held liable to pay sale tax in a state. You are not liable to pay tax in states where you do not have a nexus.

You will have to register to pay tax in each state where your company has nexus. This includes registering in your home state (where your company is domiciled), states that you frequently visit for business, states where you have fulfilment services, remote employees and affiliate marketing programs. Registration gets your business an official sales tax license. All states require businesses selling taxable goods in their state to register at least 1-2 weeks prior to selling.

Sales Tax Rates

Determining the correct tax that you should apply on your invoices means accounting for

• The tax that applies to the products in your product catalog: certain kinds of products are taxed differently in the US (for example, food products are exempt from tax in California).
• The layers of tax that apply to a particular (customer’s) address: state, county, city, local and special district taxes (for example, the sale tax rate in Minnesota is 6.875% but can be as high as 8.375% depending on local and municipal taxes). The key is to use your customer’s complete address (as opposed to their ZIP code alone) to keep you informed of what tax you are liable to collect from them – each tax jurisdiction is defined by a variety of criteria and can vary from one address to the next. It is not unusual to have multiple sales tax rates within a single ZIP code.

Exemptions

As mentioned, you should check with your individual state government as to which goods and services sold in your state are subject to sales tax. That being said, the following transactions are usually tax exempt:

• Resold items – Retailers and resellers don’t typically have to pay sales tax on wholesale purchases since it’s assumed that the end consumer will pay sales tax on these items at the point of purchase.
• Raw materials – If you produce and sell goods that will be the raw material for other goods, these items are typically considered sales tax exempt.
• Non-profits – Sales made to non-profits are exempt from sales tax in some cases. 
  If you are selling to a non-profit, make sure you get a copy of their tax exemption certification (issued by the state).

State-specific exemptions – Many states offer limited periods where purchases can be made tax-free, it is worth keeping an eye open for them (for example, Texas offers an exemption on sales tax in August during the period leading up to the beginning of the new school year). They are commonly referred to as “sales tax holidays”.

Tribocon can provide an outsourced payroll service as follows:

How to prepare your BAS

If you need to complete a BAS, the ATO will send it to you when it is time for you to lodge.
The fields you need to complete in your BAS will depend on:

• your business registrations
• whether you’re completing a monthly or quarterly BAS.

Tips for getting your BAS right:

• Reconcile the BAS figures with your records.
• Check your purchases and sales are reported in the correct period.
• Only complete the sections that apply to you.

Goods and services tax (GST) reporting
The reason most businesses need to lodge a BAS is to report and pay GST. Here are some tips to make it easier for you to report GST in your BAS:

• Keep a record of your sales and purchases
  To claim GST credits in your BAS, you will need to keep tax invoices for all your business purchases
• Work out if the goods or services you sell are subject to GST
  If they are, GST is included in the price you charge and you should provide your customers with a tax invoice.
• Put aside any GST collected so you can pay it when it’s due
  Many financial institutions offer GST accounts to businesses for this purpose.

You may receive a quarterly GST or Pay as you go (PAYG) instalment notice (or both) instead of a BAS, if:

• you report and pay your GST or Pay as you go (PAYG) instalments (or both) quarterly
• you use the instalment amounts advised by the ATO, and
• you have no other reporting requirements.

The ATO offers a range of options to make lodging and paying your business tax easier and more convenient.
Online options you can use will depend on your business structure:

• If you’re a sole trader (an individual in business) you can use the ATO’s online services for individuals (you’ll need a myGov account linked to the ATO).

Login to lodge your BAS

• If you’re in a partnership, trust or company and lodging your own BAS, you can use the ATO’s Business Portal.

You can also lodge your BAS:

• directly from your Standard Business Reporting (SBR) enabled software
• by mail
• over the phone (if you’ve nothing to report) by phoning 13 72 26.

To lodge via SBR or access the Business Portal you’ll need an AUSkey.

Due dates for BAS lodgment and payments

The due date for lodging and paying is shown on your BAS.

Even if you can’t pay on time, make sure you still lodge your BAS on time, as the ATO may apply penalties for late lodgment.
Once you’ve registered your business for goods and services tax (GST), you’ll need to complete your business activity statement (BAS) monthly, quarterly or annually to meet your tax obligations.Here are some ways to help you complete your BAS correctly and on time.

Prepare your information

Make sure your numbers are spot-on to help you report your BAS correctly the first time.
Double check you’ve included all your transactions

• Make sure they’re all business expenses
• Ensure your sales and expenses are for the same dates as your BAS reporting period
• If you’re using accounting software, make sure you’ve coded items correctly

Some things to remember are to:-

• Enter whole dollars in the boxes
• Leave boxes blank if they don’t apply to you
• You’ll only be able to enter positive values in your BAS form

From 1 July 2017, the ATO introduced Simpler BAS to allow businesses with less than $10 million turnover to report less GST information and still meet their tax obligations.

Keep your records

Once you’re done with your BAS, you’ll need to keep a copy of it and the supporting documents for a number of years to meet the ATO’s record keeping requirements.

Monthly or quarterly business activity and instalment activity statements

The Australian Tax Office (ATO) requires businesses to submit a business activity statement (BAS) monthly, quarterly or annually (annual GST return, if eligible).
It is used to report and pay goods and services tax (GST), pay as you go (PAYG) instalments, PAYG withholding tax and other tax obligations.
When you register for an Australian business number (ABN) and GST, the ATO will automatically send you a BAS when it is time to lodge. All businesses registered for GST must lodge a BAS before the due date.

An instalment activity statement (IAS) is similar to the BAS but without GST and some other taxes. Businesses that are not registered for GST would submit an IAS to pay PAYG instalments.

A Business Activity Statement (BAS) is a form that must be submitted to the ATO in order to report business tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Instalment Activity Statements (IAS)

Instalment Activity Statements (IAS forms) are used to report and pay the amounts withheld from your employee’s wages and salaries(PAYG). The IAS form is prepared on a month to month basis; this is also included on your quarterly BAS form. Goods & Services Tax (GST)

Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. Generally, businesses registered for GST will include GST in the price of sales to their customers, and claim credits for the GST included in the price of their business purchases.

Tribocon Outsourcing can help you to prepare the BAS(Business Activity statements) on your behalf.

BAS Services include:

• Preparation of Business Activity Statements from business data
• Electronic Lodgement of Business Activity Statements
• Preparation of Instalment Activity Statements and Employee Payment Summaries
• Management of financial data files and preparation of reports for business tax returns
• Handle payroll and superannuation obligations including Reportable Employer Super Contributions

Why Outsource?

• Save Money. It’s no surprise that outsourcing work saves you money. By outsourcing your BAS services you eliminate full time staff for part time tasks.
• Save Time. When you outsource your Bookkeeping and BAS functions to a skilled team dedicated to tuning your financials into shape, you can focus on what you do the best – developing the business you really want.
• Improve Cash Flow. Being able to access transparent and accurate financial records in real-time means that you can see where you are, problem solve a lack of sales, and confidently plan for the future.
• Expert Services. Outsourcing to a professional ensures that your accounts are managed by someone with the skills to do the job accurately and efficiently. You also gain access to current information on applicable regulatory requirements and obligations to ensure your business stays compliant.