Manage Your Expenses and VAT With These Useful Tips
Tips to Manage VAT and Expenses
- Utilize Technology to Alleviate Stress
The most clever move you can make is to use a well-setup and configured system to manage your bookkeeping and vat effectively.
By ensuring proper configuration, you can save time in a variety of areas, such as data entry, VAT classification, reporting, and payment.
If you’re still using a manual system, consider switching; you’ll be amazed at how much more efficient your expense process becomes.
- Check that Your Coding is Correct
Are you correctly coding your expenses?
Naturally, you must code to standard and reduced rates. Still, you should also understand the difference between zero-rated and exempt. It is also a good idea to have ‘not registered for VAT’ and ‘overseas’ codes.
When it comes time to file your VAT returns, all these different categories will be important, especially if you have any overseas costs requiring reverse charge VAT.
- Check That Your Bookkeeping and Vat Are Up To Date
Keeping clear, accurate, and timely records is critical when managing VAT on expenses.
It is easy to let things get out of hand when so many different payments are made, and receipts and invoices fly around.
Great record-keeping is the foundation of a well-managed expenses and VAT system.
- Save Your Evidence
Although HMRC suggests you don’t need to keep receipts for PAYE purposes, you must still demonstrate that you follow the rules correctly. Make sure you have documentary evidence to show why you did.
The best expense management systems will allow you to save an image of a receipt, eliminating the need for bulky and inefficient filing systems.
- Make Sure You Have a Well-Thought-Out Policy
This is critical for any well-run business.
An expense policy is required because it informs employees about what they can and cannot claim. It will also specify limits for items like hotel rooms and subsistence.
However, make certain that it is written in clear and easy-to-read language. Avoid using jargon you may have picked up from the HMRC website, and include real-life examples to illustrate your points.
Of course, you must ensure that your policy does not conflict with any VAT or PAYE rules governing employee payments.
- Maintain a Regular Review Process
When you have all of your policies and procedures in place, it is easy to exhale a huge sigh of relief and believe that your work is finished.
However, VAT law is constantly changing, and you must ensure that you are up to date on the most recent rules.
Make sure to read the VAT notices issued by HMRC (you should receive them automatically as a VAT-registered business) and, if things change, make changes to your systems and processes.
However, hoping to catch things through updates is not enough.
Make a point of scheduling a VAT compliance review every 12 months or so to ensure that your policies are up to date.
- Remember to Include VAT in Your Recharged Expenses
This is a common source of confusion. Simply put, you charge VAT to your customers on recharging expenses that you incurred as part of providing a service to them.
Disbursements, or payments made on behalf of a client, do not attract VAT, which is where the confusion arises.
For example, if you pay for market research on your client’s product and simply pass it on to them, this is considered a disbursement. If you read the report and use it to make suggestions to help your client market their product, this is a tax-deductible expense.
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