Small business owners need to take measures to avoid costly mistakes when it comes to calculating, reporting and paying Value Added Tax (VAT).
The best way to prevent errors and stay on the right side of HM Revenue & Customs (HMRC) is to have an expert take care of your VAT affairs.
Having a qualified accountant or bookkeeper can ensure that all calculations are correct, up-to-date, and submitted on time and in line with the latest VAT regulations, including Making Tax Digital.
Employing an accountant to keep on top of record keeping will go a long way in preventing expensive mistakes and financial penalties related to VAT.
Some of the most common VAT errors include:
- Entertainment: You can claim back VAT on entertaining employees, but not normally for clients.
- Split usage: Where you provide items such as cars or phones, you can only claim VAT back on business use.
- Inaccurate information: Entering the wrong figures on a VAT return may leave you liable to an investigation by HMRC or lead to you paying too much or too little tax.
- Filing late: Ensuring that you file the necessary VAT information, on time, each quarter is essential to preventing the accumulation of penalty points, which can lead to a fine.
- Failing to register: If you reach a taxable turnover of £85,000 or more in any tax year, you will need to register.
To cut down on the chance of errors there are a few things you can do to improve VAT reporting:
- Take time to update – Keep on top of VAT by setting aside a regular time each week – or each day – to update your accounting records.
- Maintain accurate records – It is important that you retain invoices and receipts so that you can accurately report VAT. This is easily achievable with the latest cloud accounting software and apps.
Speaking to a VAT expert will help you avoid many of these mistakes, which can be easy to overlook, but could be costly to you and your business.
What you should include in a business plan
Business plans provide goals to work towards, help identify potential problems, give insight into competitors, and highlight potential opportunities.
A great business plan should include a concept, strategy, executive summary, market analysis, competitor analysis, the company’s financials and a clear action plan.
This part of the business plan is usually broken down into three elements:
- Executive summary
- Company description
The executive summary will highlight the mission of the business by describing its products and services.
It might also be a good idea to briefly explain why you are starting your business and include details about your experience in the industry that you are entering.
Understand the scope of your business, as well as the amount of time, money, and resources you will need to get started by writing it down to help clarify your ideas.
You should identify your target customers’ needs, desires and pain points and understand how you can meet them. You also need to understand what else is available on the market and how your offering differs.
While it is important to understand the market you are operating in, it is also important to assess the success and weaknesses of competitors within your market to spot gaps and beat the competition.
A crucial area, this should outline projections for short-term growth and long-term profitability. You should include projections of your profit and loss statements, balance sheets, and cash flow statements for the next three years.
Setting these points out should help you create a clear set of definable actions that can help your business to grow and flourish. Having a detailed, well-prepared business plan will increase the chances of survival and success for any venture.