Value Added Tax (VAT)
Value Added Tax (VAT) is a consumption tax applied to goods and services. In UK different VAT rates are applicable to different goods and services. VAT in UK is a self-assessed tax, meaning that the seller of goods or services must make regular returns to HM Revenue & Customs (HMRC) about the value added tax they charge customers.
The standard rate of VAT is 20% on most goods and services. For some
goods and services, a lower rate of 5% applies and 0% for VAT exempt items.
VAT is a complex area and various different rules apply to businesses depending on their nature of trade and industry they are in.
The basic principle is to charge VAT at each stage in the supply of goods and services (output tax). If the customer is registered for VAT and uses the supplies for taxable business purposes, he will receive credit for this VAT (input tax). The broad effect is that most businesses are not affected and VAT is actually borne by the final consumer.
Scope of VAT
A transaction is within the scope of UK VAT if all the following conditions are met:
• It is a supply of goods or services.
• It takes place in the UK.
• It is made by a taxable person. A taxable person is a person who is or is required to be registered for VAT.
• It is made in the course or furtherance of any business carried on by that person.
• It is a taxable supply i.e. one on which VAT is charged whether at standard rate; reduced rate or zero rate.
A transaction which does not meet all of the above conditions is outside the scope of UK VAT.
Place of Supply
A supply must be made in the United Kingdom to be subject to UK VAT. Supplies made outside of the United Kingdom are not subject to UK VAT (though they may be subject to VAT in another country).
The “tax point” is the point at which a supply of products is considered to have occurred for VAT purpose. VAT must usually be accounted for over the VAT period in which the tax point arises, and at the current VAT rate. Small companies, can opt to account for VAT based on cash paid and collected if they fulfil the criteria.
The VAT due on taxable supplies is called output tax, and it is the responsibility of the business who makes the supply, which means the seller must pay the VAT to HMRC.
Input tax paid on goods and services by businesses registered for VAT can be reclaimed if the input tax was paid on taxable business supplies made by the taxable person in the course of his business. The difference between the Output & Input Tax is either paid over to HMRC or reclaimed back.
VAT registration is not needed for all Businesses. If a business makes taxable supplies, it must register with HMRC if either:
• the value of taxable supplies made in the previous 12 months exceeds the VAT registration threshold (Currently £ 85000); or
• there are fair grounds to believe that the value of taxable supplies to be made in the next 30 days would surpass the VAT registration threshold.
Can I still register for VAT if my taxable turnover is below VAT threshold of £ 85000?
Yes you can still register for VAT if your turnover is under VAT threshold. There are certain advantages to it.
• You can claim any input tax paid on your business expenses;
• The right to collect Input VAT on goods and services purchased for your company is another benefit of voluntary VAT registration. If you sell one type of VAT- rated product (e.g. zero rated) when purchasing another (e.g. regular rated), you might be eligible for VAT refunds from HMRC.
• If you register for voluntary VAT, you will recover VAT you paid before you began the business, as long as the products or services are now solely used in the business. So, if you’ve been in business for a while but haven’t yet met the mark, you can still reclaim VAT if you keep good VAT records and invoices.
Why Choose Us?
We provide VAT compliance and advice services. VAT is a complex area, different rules apply to different products and services and is administratively time consuming. With the ever-changing VAT laws, you must keep your VAT affairs up to date to avoid any penalties or enquiries from HMRC. We assess your situation and then suggest the most appropriate VAT scheme for your business.
Our VAT service includes:
• VAT registration
• Monthly or Quarterly preparation of VAT returns and submission with HMRC
• Flat rate scheme, Annual Accounting Scheme, Retail schemes & Cash Accounting
• Opting to tax land and buildings
• MTD ready and compliant
• Free Accounting software which you can use to record your income and expenses with Secure bank feeds
• Transferring VAT number from Sole trader to a Limited Company
We accept your data in any format to make life easier for you and to allow you to focus on your business. We can integrate with all major accounting software if it’s in the cloud. You can also bring your records to our office or we can arrange to collect them from your place, process them, and return them to you.
VAT involves careful examination. We make sure that VAT affairs comply with all law and regulatory requirements. Our team of experts will review each item of Income and Expense to ensure all accounting and VAT requirements are met. As a registered members of Chartered Institute of Taxation and The Association of Chartered Certified Accountants, we ensure highest professional standards, client satisfaction and quality service.
Require more information?
If you want more information or would like to discuss this further then call us on 020 8191 1732 or email us on ‘firstname.lastname@example.org’.
To book a free consultation, click here.