Barrister: My first VAT return is due. Can you help?
When you come to complete your first VAT return the first message is: don’t panic! The return in itself is not a difficult form to complete so don’t ignore it and then be late submitting it to HM Revenue & Customs. If you are late, you may be liable to a default surcharge. The reputation of the “dreaded” VAT return is perhaps more to do with paying over the VAT and hunting out your accounting records rather than the calculation and completion of the return itself. We advocate making provision for the payment by putting aside sufficient funds into a separate tax savings account as you go along. How you fill in your return will depend on whether you have joined the flat rate scheme or not (see below).
Standard returns
The return is a single-page form which you complete by entering the appropriate figures from your records into several numbered boxes. Chambers will probably supply you with a schedule of your fees received, which will give you both your VAT due on sales and the total value of sales (excluding VAT) to be entered in boxes 1 and 6. Box 2 will normally be ‘none’ and so Box 3 should equal Box 1. The VAT reclaimed on purchases and the total value of purchases excluding VAT (Boxes 4 and 7) will be extracted from your record of payments in whatever form you maintain it. If you choose to use our simple payments analysis the figure is quite simple to extract. You can download it by clicking on the link below:
The difference between the VAT that you have collected on your fees (output tax) and the VAT that you have been charged on your expenses (input tax) is the tax you pay and is entered into Box 5. This must be remitted to HM Revenue & Customs within a month of the return date. If you buy something for your practice, such as your wig and gown, prior to but in anticipation of registration, you can claim back the input tax. It is not uncommon with your first VAT return for there to be a repayment because your expenses can often exceed your income There are actually several other figures to enter on the return itself, which are required for statistical purposes, but the important message is not to panic, particularly with the first Return. Ask us for guidance if you are at all in doubt.
The flat rate scheme
Chambers will probably supply you with a schedule of your fees received, and you need to put the value of your fees excluding VAT into Box 6. Multiply the VAT inclusive figure by the applicable flat rate to calculate the VAT due under the flat rate scheme, and put this figure into Box 1. Since Box 2 will normally be ‘none’, Box 3 should equal Box 1. Box 4 will also generally be ‘none’, as will Box 7, unless you have acquired any capital assets costing more than £2,000 (including VAT). The difference between Box 3 and Box 4 is the tax you pay and is entered into Box 5. This amount must be remitted to HM Revenue & Customs within a month of the return date.
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Where next?
Within Pupil barrister…
- Registering for tax & NIC
- Registering for VAT
- Opening a bank account
- Setting up your accounting records
- To what date do I prepare accounts?
- Will my pupillage awards be taxed?
- How can I borrow tax efficiently?
- When do I pay my tax?
- How much should I put aside for taxes?
- Which expenses can I claim against tax?
- Do I need to maintain a mileage log?
- Do I get full tax relief for my car and computer?
- Can I claim tax relief on my court clothing?
- Am I taxed on my receipts or my earnings?
- I have no history of earnings: how can I get a mortgage?
Within Barrister…
- Established barrister section
- Read about our Bar Department
- Meet Andrew Hood, Bar Department Manager
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