By Melanie Dawson, Marketing Coordinator, Sage UK Limited

No doubt at some point a VAT registered business will hear these words, “VAT audit” and for most people it will send shivers down their spine. This won’t be necessarily due to something they’re hiding, but realistically it is a somewhat daunting and nerve racking experience if you don’t know what to expect. In the main it shouldn’t be, because as long as you’ve kept yourself above board and kept your records up-to-date, then you shouldn’t have anything to worry about.

The fact is that a VAT audit is time consuming for a small business, you have to sit with the VAT auditor and trawl through accounts / VAT returns and audit trails, when you would rather be out pursuing sales!

Here are a couple of tips to prepare for the visit

1. Get your Accounts to hand — audit trail print outs, VAT detailed reports and invoices/receipts.

2. Have to hand your last VAT return as you will un-doubted go through this

3. Speak with your Accountant if you have one, to let them know you’re having an Audit, their experience and advice can help you.

4. Make sure you know which VAT scheme you are running, VAT Cash Accounting or standard VAT scheme. If you’re on the VAT Cash Accounting scheme, you pay VAT on receipt of payment rather than invoice, which can confuse things slightly when a VAT period is calculated, so the VAT auditor has to be aware of this.

5. The VAT auditor will no doubt query a few things, help where you can and if you can’t, contact your accountant for confirmation on the items you are unsure about.

6. Make sure your VAT registration date is correct, as if it isn’t this could lead to a lot of hard work. For example, if the date is before the time you started calculating VAT, then you will end up needing the back date your invoices to include and calculate VAT.

7. Apply before the threshold rather than waiting to hit it, for example, applying before the £73,000 limit which will give you time to register.

8. Always print a summary and detailed VAT report off. If you’re using software, you then know which items were included in that particular VAT period. Handy to know, if you’ve had a late invoice go in after you’ve closed off a VAT reconcile/period.

Tips for keeping yourself out of trouble

• Use a good software to keep track of your sales, purchases, payments, receipts and VAT

• Always use the correct VAT rate which will help calculate your VAT returns correctly

• If you’re unsure of what VAT rate you should be charging, then contact the VAT office or your accountant who can offer advice.

• Keep your records in an organised, dated order, this really helps when you need to pull out specific information

• Keep your accounts records for 7 years

• If you use software, keep two copies of backup data for each year, in case you need to refer back to it.

Finally, if you don’t use software, you may think about investing in some, it can save you hours of time when it comes to doing your accounts. Sage 50 Accounts 2012 will help towards keeping track of those important sales and purchases as well as calculating VAT, meaning that your VAT return can be ran in no time. The new release of Sage 50 Accounts 2012 also introduces Sage 50 Mobile which gives you access to your accounts whilst on the move.

Sage World is a unique event for anyone looking to start or grow their business. It’s a place where you can see inspirational business speakers, seminars and live product demonstrations. Delivered by Sage UK at EventCity, Manchester on the 12th and 13th of October. Book your FREE place at www.sageworld2011.co.uk

Watch a video of Paul Hepburn, Financial Accountant at Sage UK on top tips for VAT and good sources of finance advice.


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