With 50% of small businesses worried about VAT, we offer a straightforward guide to everything you need to know – and how to manage it in your software.

Why VAT is important to your business

Getting your VAT right is vital, from knowing when to register to submitting the right information in your returns. According to research by HMRC, 50% of small businesses worry about making mistakes in following the rules for VAT.

And it’s important to get it right first time. Fines and late payment fees have a huge impact on your finances. And overpaying can really damage your cash flow –  delays in VAT refunds to businesses rose by 44% in the last year, according to law firm Pinsent Masons.

But getting your VAT correct needn’t be a nightmare. Sage software is designed to record all the necessary information so you can see exactly what VAT will be due and keep on top of your VAT returns.

Easy ways to keep on top of your VAT

Follow these simple suggestions to make your VAT easier to manage:

• Set up a reminder so you know when your VAT is due: HMRC offers a free service to email you when your VAT is due. Set up your reminder here.
• Keep your finances in order: it sounds simple but it can be hard when you’re running a small business. Looking at your finances regularly is easier than trying to get everything in order at the end of the VAT period.
• Know how much VAT you owe before it’s due: keeping an eye on the VAT you owe helps avoid nasty shocks later. It’s easier if you set your VAT aside from your company’s cash so you know you have the money to pay.

Submitting your VAT return

Since April 2012, all businesses have had to submit their VAT online. Before you submit your first return, you’ll need to make sure you’re registered with HMRC. If you used the online service after 30 October 2012 to register your business for VAT you’ll already be signed up.

The information you need

You’ll need to make sure you have the correct information available for your return including:

• The VAT you’ve charged on your sales (output tax)
• The VAT you’ve paid on purchases (input tax)
• The difference between the two – even if they are the same, you still need to submit a VAT return

Sage software automatically calculates these figures so you know exactly where you stand with your VAT, no matter which scheme you’re on.

Things to check

Before you submit your return, it’s important to check the information. There are several common errors that can occur at this stage. Make sure:

• The dates are correct on your invoices: this is normally easier if you’re on the Cash Accounting scheme. If you’re on an Invoice Accounting scheme, the date of the invoice should list the date of supply, which is not necessarily the date of sale. See the HMRC website for more information.
• You haven’t reclaimed VAT on purchases related to the sale of goods or services that are exempt from VAT
• You have recorded all the information required for your invoices: this includes a unique invoice number, customer’s name and address, quantity of each item, discounts and VAT amounts

Sage software makes it easy to check your return and the new Sage 50 Accounts has even more VAT features to make it even easier.

• Automatically verify your VAT figures
• Check you have included all the information and see any anomalies
• Validate your submission, before you send it
• Submit online through your software and trace it later for any audits

Watch the video to see how the new version of Sage 50 Accounts could help your business with VAT

How to submit your VAT using Sage 50 Accounts

1. Click on Company.
2. Click on Manage VAT.
3. Click on VAT return.
4. Take a backup and then choose the dates for your return. Choose whether to include reconciled transactions.
5. Click on Calculate VAT return.
6. The software will tell you how many transactions have been included and will take you through to a verification screen.
7. This screen will show any queries, allow you to make adjustments and print your VAT reports.
8. Once you are happy with all the information in your return, click on Reconcile VAT return.
9. To submit your VAT return automatically, click Submit online and follow the simple steps.

If you can’t pay your VAT

If you’re having trouble paying your VAT, contact the HMRC Business Payment Support Service as soon as possible – even if your VAT isn't due yet. They offer help and support, including:

• advice about options available
• making payments over a longer period
• waiving late payment fees

Call the Business Payment Support Service Helpline on 0300 200 3835.

Where to go for more information on VAT

• Looking for training on VAT? Visit our VAT training website for details of seminars and online and 1-2-1 training.
• Download our guide to VAT for more advice and information.