What happens if input vat is more than output vat

What is output and input VAT ? How much is the output VAT? The vendor is required to remit the VAT collected to the FIRS. Where output VAT exceeds input VAT, the taxpayer is required to remit the excess to the FIRS.

However, where input VAT exceeds output VAT, the taxpayer is entitled to a refund from the FIRS.

However, during the course of business, we also incur some expenses. If you will take a look at any receipt, say, from your nearest coffee shop. The output VAT is £30On the VAT return, output VAT should be deducted from input VAT , which in this case amounts to £1600. If your VAT on purchases exceed the VAT on sales in any given perio the difference will be negative and refunded to you.

In the VAT settlement , you deduct output VAT from input VAT which comes to £16The resulting amount must be reported to your regional tax office. If your purchases exceed your sales in any one perio the difference will be negative, and the difference will naturally be refunded. VAT Payable meaning the amount of tax to be paid to the government, this is the net difference between Output tax and Input Tax, or in simple words VAT Payable = Output Tax – Input Tax.

Which means a seller can deduct taxes he paid during his purchase in total taxes collect from the sales transaction. These rules are mostly applicable on input VAT as to its availability for deduction or credit against output VAT such as in input VAT on capital goods costing P1M having a useful life of more than five years, final withholding of VAT on sales to government, refund of input VAT attributable to zero-rated sales, and expenses, and recording as expense of input VAT attributable to VAT-exempt sales transactions. The difference is either paid to SARS (this occurs when output tax exceeds input tax) or a refund is claimed from SARS (this occurs when input tax exceeds output tax). If a vendor is entitled to a refund , SARS is required to pay that refund within business days of receiving the correctly completed VAT return in respect of that refund.

Input VAT is the value added tax added to the price you pay for eligible goods or services. If you are registered for VAT, you can deduct the amount of VAT paid from your settlement with the tax authorities. VAT registered businesses charge and add VAT to the value of goods and services they supply.

They can also reclaim VAT incurred on goods and services. However, there are instances when the opposite is true, particularly if the buyer’s own sales transactions are subject to VAT (such as in the case of export sales). And also, your VAT return will look very different if you’re on the Flat Rate Scheme.

Let’s look in more detail at these. The output VAT is the amount of tax collected on the company’s sales, and the input VAT is the amount paid to the supplier towards purchases and expenses. Under the reverse charge output VAT ( VAT on income) must be declared in Box of the VAT Return.

This VAT , subject to the normal rules, is also recovered as input VAT ( VAT on expenses) in Box 4. So the overall effect is NIL. This clawback of VAT should be declared on the VAT return which covers the period in which the six-month payment period ends.

If you have received more VAT than you have charge you will pay the difference to HMRC. But, it is never that simple. The net VAT in a tax period is the amount to be remitted to the FIRS. It is derived by multiplying the value of the aggregate supply by the tax rate, while Input VAT is what is charged on business purchases and expenses. Sample computation on sales to government.

P000worth of goods plus VAT or P120to Government Agency (GA). Output VAT is the VAT that is due on VATable supplies. VAT : of VAT Payable ( Output Tax less Input Tax) Non- VAT : of Gross Sales (also called Percentage Tax) Business Structure. Alternatively, VAT can be recovered in full on the entire purchase of goods provided output VAT is declared on a self-supply of the non-business element.

Free accommodation to employees Generally input VAT cannot be reclaime unless employees have to be given domestic accommodation wholly for a business purpose and HMRC agreement is obtained. When the monthly balance is a debit balance where there is tax to pay. This is occasioned by the fact that the output tax is more than the input tax in that calendar month.

The VAT monthly balance can also be a credit balance. There’s also our tax responsibilities for startup businesses, if you need a more general guide to tax. VAT taxable turnover is the total value of everything you sell, unless it’s exempt from VAT.

This article discusses how to handle late claims for VAT.