Things,You,Need,Know,Before,Th finance, share, loan Things You Need To Know Before The Vat Inspection

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The first step to keeping out of trouble is to understand the basics of the paperwork required. The second step is to ensure accurate financial records are maintained and many types of accounting software and bookkeeping software can assist by at the very least producing a required audit trail to support the financial figures entered on the quarterly vat tax return.To determine the need for accuracy and compliance it is worth first summarising the work a vat inspector might carry out when the business is visited to carry out an inspection of the business financial accounts.While each customs and excise inspector might tend to conduct the audit in their own way typically the totals for several quarterly tax returns will be compared with the total sales turnover and total expenditure to indicate if the returns are likely to be accurate. In addition cash and bank accounts may be examined to determine if the volume of payments and receipts also reflects the scale of financial transactions.Having put the overall financial position into perspective the vat inspection will involve selecting several previous quarters which will be audited in more detail. The number of quarters and the choice of quarters are likely to be dependent upon the quality of accounting records being maintained and the overall view of accuracy.It is quite normal for the inspector to select the most recent vat return to audit plus a second quarterly return submitted in the previous 12 months and potentially a third quarter from a period in the previous 2 years. Any unusual figures shown up from the audit overview are more likely to determine which quarters will be examined in detail.In examining each quarter the vat inspector will establish the audit trail and verify the totals making up the financial figures declared on the value added tax return. Individual amounts making up the audit totals would then be checked by individually checking sales and purchase invoices in addition to most major amounts.Some items selected for audit during the inspection will be checked through to the cash and bank accounting records. Many items of major financial significance and items of a repetitive nature will also be audited through to final receipt of money from the debtor receipts and creditor payments.Several sales invoices and purchase invoices will be selected by the inspector for tracing through the debtor and creditors accounts to ensure that customer or supplier has also entered the same transaction into their financial accounts.This cross checking with third parties is also likely to be carried out as the inspector is likely to have details of transactions from third parties which he expects to find recorded in the business vat accounts being inspected.Maintaining records of the value added tax is an essential accounting function required from the accounting or bookkeeping software employed. Getting the basics right can help considerably to avoid the minefields that lay in wait for those businesses that fail to address the subject with sufficient importance.A first step should be to ensure sales invoices are issued for each sale and a copy of that sales invoice is retained and accurately entered in the financial accounting records. The design and information contained in the sales invoice should comply with the value added tax rules.The details to be shown on a sales invoice are a sequential number to uniquely identify the invoice and the date issued which is the tax point, business name and address, customer name and address, vat registration number, a description of the goods and quantity supplied, the percentage charged and the amount of output vat.The accounting software employed and used to record the sales invoices should produce an audit trail for both output tax and input tax on purchase invoices received.Should errors be discovered after the quarterly return has been submitted which total less than 2,000 the correction can be made on the next available quarterly tax return. If an error exceeding 2,000 pounds is discovered the customs and excise office must be informed in writingThere are a multitude of errors made in the accounting records supporting the quarterly vat return. Using a proprietary brand of bookkeeping or accounting software can eliminate many of these errors and produce an audit trail which at the very least gains the respect of the vat inspector.The vat inspector will find checking easier and having been presented with an audit trail has greater confidence the value added tax liability declared is more likely to be accurate.Common areas where errors occur in recording sales vat output include charging value added tax on sales of business assets, supplies and gifts to employees at reduced prices, not accounting for the full sales price when an item is taken in part exchange, including vat on credit notes.Errors reclaiming vat inputs on purchases occur because businesses claim value added tax when a proper vat receipt has not been obtained, claiming input tax on entertainment expenses which is not allowed and also claiming input on vehicle purchases. Businesses may not claim vat on imported goods until the vat certificate has been received.Finally an area which confuses many small business owners is the correct recording and treatment of under and over assessments of the tax. These items should be accounted for as receipts or payments into or out of the value added tax due account and not entered in the sales and purchase records.If these assessments are entered into the sales ledger or purchase ledgers the items will appear in the figures produced for the quarterly return which is wrong. It is wrong because the value of the under or over assessment will effectively be doubled up.The quarterly vat return should be signed and dated by the business owner or a designated responsible official who verifies that the tax return is correct and is legally responsible for the accuracy when signing the return. Article Tags: Accounting Software, Audit Trail, Accounting Records, Quarterly Return, Value Added, Purchase Invoices, Sales Invoices, Sales Invoice