WORKING OUT YOUR VAT REFUND OR PAYMENT
Updated: Mar 22, 2022
VAT IS A SIMPLE FORMULA…
Unless you’re using the flat rate scheme, you’ll work out VAT by comparing the amount you paid on purchases to the amount you collected on sales.
VAT collected - VAT paid = VAT payment or VAT refund
*If the result is a negative number, this means you’re owed a VAT refund from HMRC.
*If the result is a positive number, this means you need to make a VAT payment to HMRC.
HOW TO WORK OUT VAT IN FOUR SIMPLE STEPS:
Make a note of the VAT paid on your business purchases
Make a note of the VAT collected on sales
Add both types of VAT
Run the VAT formula
(VAT collected - VAT paid = money you owe HMRC or money owed to you by HMRC)
AVOID NASTY SURPRISES WITH SMART BOOKKEEPING:
Like any business, you’ll aim to sell more than you buy. If you succeed in doing that, you’ll most likely end up with a VAT bill. Run the four-step VAT equation regularly so you can:
Work out how big your VAT payment is shaping up to be.
Transfer cash to a separate bank account to cover the bill.
VAT LOAN FUNDING:
Spreading the costs of your VAT costs is a viable option if your business is, for whatever reason, unable to keep up with the quarterly VAT deadlines. It may be that you simply would prefer to spread the payments over a longer period of time. VAT loan funding is also becoming a popular choice for companies who are wanting to improve their cashflow both in the short and long term.
If you would like more information or would like to begin an application towards securing your own loan for your business, then please do not hesitate to get in contact with one of our finance brokers on 01908 429888 or via info@approved-finance.co.uk
Reference:
Xero. 2022. How to Register for VAT | VAT Guide | Xero. [online] Available at: <https://www.xero.com/uk/guides/vat/registering-for-vat/> [Accessed 25 January 2022].