Wahey! I’ve completed my first two tax returns. This post will consist purely of the boring details, for the benefit anyone else who has to do the same thing, so the rest of you, please switch off now.
To be fair the first one was cheating: PAYE. (i.e. employer’s and employee’s NI, plus employee’s income tax). This is the second time I’ve paid myself a salary, but the first time, no tax was due (because of course I’m paying myself less than my previous employment was). It was cheating because my accountants calculated it, together with HMRC, and I just got a letter telling me how much Macrobug needed to pay the HMRC. Then it was a simple matter of going to https://www.billpayment.co.uk/hmrc/ and paying them.
The second - VAT - was a proper tax return, where I actually had to add things up. It looks deceptively simple… there are just nine boxes.
- VAT due on sales
- VAT due on acquisitions from EC states
- Box 1 + Box 2
- VAT reclaimed on purchases
- Box 3 - Box 4
- Value of sales and other outputs excluding VAT
- Value of purchases and other inputs excluding VAT
- Value of all supplies excluding VAT to other EC states
- Value of all acquisitions of goods from EC states
All three boxes relating to ‘EC’ were zero for me, so that was easy. Box 1 is simple… you worked that out when you invoiced your customers.
Box 4 is tricky. You need to go through each expenditure your company has made, and work out the VAT you paid on it. It will be shown on the invoice/receipt. Some things don’t charge VAT, e.g. train tickets. However you can only include things on which you can reclaim VAT - which is where it gets tricky. I’m not sure of all of the rules, but for example, you can’t reclaim VAT on entertaining.
So, if you buy some food or drink for business associates, when you record that in your spreadsheet, you must either put down 0 for VAT, or make a note that VAT mustn’t get charged on that entry. If the latter, your magic auto-VAT calculation formulae will have to take account of it.
The next box is easy - it’s the difference between box 3 and 4, and it’s the amount you pay to HMRC. You can do this electronically too, though there’s no nice Visa-compatible web page, you need to do a bank transfer.
All that was expected. It was boxes 6 and 7 that made me have to think. Here you have to add up the non-taxed bit of each thing. That’s quite easy for your sales, but for your purchases it is more tricky. Because you have to distinguish between things to include in your VAT calculations but which have zero-rate VAT, e.g. train fares, versus things that you’re not going to include in your VAT calculations at all, e.g. entertaining.
All of which required some extra columns and maths on my accounting spreadsheet. But hopefully it’s all done now and I won’t have to touch it again.
Anyway, here’s the form you get. You can choose to fill this in quarterly or annually. Quarterly seems best, or the annual reconciliation would be huge. You can also do it on-line, but not for the first one, as far as I can tell.
