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Book Keeping and Vat in the Uk

Essay by   •  April 6, 2011  •  Essay  •  463 Words (2 Pages)  •  2,201 Views

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Bookkeeping is an essential part of a business success. Bookkeeping is very important for the financial control of a business, from where you will be able to monitor, or forecast the business performance.

Good records are needed for Tax administration. Companies must interact with government departments to collect tax. Most businesses are involved in the collection of PAYE, National insurance, VAT, Schedule D or Corporation tax. A company can be liable to severe financial penalties if failing to collect the right amount of tax.

Up-to-date records reduce a lot, processing time when it comes to calculate profits or Tax. With good records an accountant is able to perform his job quickly and cheaply. If financial records are not properly in order, a company will have to pay heavily, accountants to gather basic data together.

Should a bank loan be needed, up-to-date financial records will become essential. Banks will ask to see past records as a guide to business profitability. A well kept, bookkeeping system gives the image of a well-in-control business, which will give banks confidence that the dept will be paid as agreed. Finally an accurate bookkeeping system will sound an on-time alarm when things start to go wrong and gives you all financial information necessary to control your business.

Vat in Britain is divided in four different broad categories:

The standard rate is currently set at 17.5%, this is the largest category and it includes most of goods and services. Kitchen appliances, computer accessories, and clothes are all items that fall in the standard rate broad band. The trader adds VAT to every item sold.

The special lower rate supplies, category includes items such as domestic fuels, pensioner's security and energy saving material. Vat is levied on these types of products, and in Britain is currently set a 5%.

The Zero rated category is like the standard rate, but with the difference that tax is levied and no tax is charged to the customers. Traders trading at zero percent are still entitled to reclaim VAT paid out by them. This means that HM customs and Excise regularly refunds VAT to businesses trading in Zero-rated. Food shops and bookshops fall in the category of the zero rated traders.

The fourth broad category is the Exempt supplies; these are supplies exempt from tax. If all supplies of a business are exempted from tax any input tax paid cannot be claimed. Insurance, some categories of education and training and healthcare are some examples of exempt supplies.



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