TAILIEUCHUNG - How to Understand Business Finance, Second Edition_8

Tham khảo tài liệu 'how to understand business finance, second edition_8', tài chính - ngân hàng, tài chính doanh nghiệp phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 116 How to Understand Business Finance VAT Put very simply we charge customers VAT on most sales and we pay suppliers VAT on most purchases. At the end of each quarter we pay Customs and Excise the balance or claim it from Customs and Excise if we have made more purchases than sales that attract VAT. You might think that claiming back VAT is a good thing until you realise what it means - you are buying more than you are selling. Indeed a large VAT bill is a healthy sign it means not only that you are selling more than you are buying but that the difference in value is big - you are adding value hence the name. The only problem is that it can knock your cash flow for six. VAT can be a nightmare for people still doing their accounts manually though in principle the record of VAT is no more than another column in the sales and purchase ledgers. Modern software makes it very easy. When entering each transaction the appropriate VAT code is nominated and the computer does the rest. At the quarter end at the press of a button the machine tells you how much you owe or how much to claim. We said above that we charge customers VAT on most sales and we pay suppliers VAT on most purchases. There are exceptions to this and without going into it in great detail here are a few examples There are a few purchases that are not subject to VAT eg books some printed materials travel insurance food but not from restaurants and children s clothes. There are some suppliers who are not big enough in turnover terms to have to charge VAT. They are not VAT registered. If goods or services are delivered in the EU VAT does not have to be charged so long as the supplier is in possession of the client s VAT registration number. There are some complexities around this but the general statement is correct. If goods or services are supplied outside the EU VAT is not applicable. 117 The Hidden Costs - Depreciation Amortisation and Tax It is important to realise that VAT does not feature in or affect

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