Managing VAT is a big task for the 2m VAT-registered businesses in the UK. And HMRC’s Making Tax Digital (MTD) programme now requires most VAT-registered business to keep bookkeeping records digitally, and to submit their VAT to HMRC through MTD-compliant software.
MTD is the biggest shake up to the UK tax system since self-assessment was introduced in the late 90s. We want to help make the switch to MTD for VAT as easy as possible, and to make it simple for companies new to VAT to get up and running quickly.
Our first step towards that? The ability to record VAT on your transactions and add VAT to invoices.
We want to make it incredibly simple for all VAT-registered businesses to keep their records up to date. We’re doing that in three ways:
Where possible we’ll automatically apply a VAT rate to each transaction you make using your Coconut card – and we’ll keep you updated along the way. For example, insurance is exempt of VAT so any transactions classified as insurance will be marked as such.
VAT rates can vary, so where we’re not 100% confident we’ll suggest a rate to you and make it clear that’s what we’re doing. You can then decide whether we got it right for you and your business. Simply tap into the notification and accept our suggestion or choose a different rate in a matter of seconds.
We understand that VAT can be complicated. Understanding the differences between the standard & flat rate, and which kind of transactions are Exempt of VAT, 0% VAT or simply No VAT is not as straightforward as it could be.
On top of automating as much as we can for you, we’ll also provide lots of helpful guidance along the way. We describe accounting terminology in straightforward language and provide simple advice to limit mistakes and improve your understanding of your business.
Your VAT settings are all housed within your Business Profile.
Once you’ve done that, all of your future income and expenses will start recording VAT.
With each and every transaction we’ll give you the options you need to record and manage VAT in the right way for your business. If the rate we suggest isn’t quite right, you can choose from a set of alternative rates that are typical for each specific transaction, or you can simply tap to see the full list and select for yourself.
Coconut supports the cash basis accounting scheme, available for businesses with up to £1.35m turnover. This scheme is popular with many businesses as it can improve cash flow on the basis that you don't have to pay VAT on any invoices until you get paid. It works best for businesses if you are typically in a repayment position (i.e. invoicing more VAT than you claim). We also support both the Standard rate and Flat rate schemes. If you’re unsure on which is best for you it might be helpful to speak to an accountant.
Once you’ve enabled VAT, you’ll be able to add VAT to the line items on all of your invoices.
Each invoice will then show:
Making it a fully valid VAT invoice as per HMRC guidelines.
Applying your VAT registration dates
Soon you’ll be able to set your own custom VAT start date which will allow you to historically set VAT on transactions made using Coconut. So for example, if you completed a VAT return in March, you might want to start applying VAT to transactions from March onwards.
Get support from your Accountant
If you’re a VAT-registered business, or reaching the £85,000 threshold whereby you now need to register, we recommend speaking with an account for expert advice.
For those that already have an accountant, you can share access to your Coconut account with them through our Accountant Portal. From there, they can help you apply the correct VAT rates on your transactions and submit accurate VAT returns.
If you don’t yet have an accountant and would like some guidance, fill in this short form and we can introduce you to our integrated partner services team to see where they can help.
Using Coconut to submit your VAT return.
Once you’re using Coconut to record your VAT, you’ll soon be able to submit your VAT returns to HMRC, from directly within the app. If you’re due to complete a VAT return soon, we can help. Speak to one of our team today by emailing email@example.com.
Coconut customers - head over the app and start recording VAT on all future transactions today!
If you’re new to Coconut and looking for a current account that takes care of your business accounting and tax, download the app for free and create an account in minutes.
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