VAT

VAT can be a complex area and its complexity is increasing each year. It represents one of the biggest sources of revenue for the Government and the onus for collection falls on businesses.

Mistake in calculating the VAT can be extremely costly as many individuals and business have found. Receiving timely advice can help you to avoid pitfalls and could result in significant savings. Here at Acctech Consulting we can help with all aspects of this tax including advising:

  • Benefits & disadvantage of becoming VAT registered
  • Preparation of VAT returns
  • Cash accounting
  • Partial exemption
  • Flat rate scheme
  • VAT investigation

Let us help you to keep your VAT affairs in order, making sure you are collecting the right amounts for each transaction, and ensuring that you make payments and file returns correctly and on time.

As a business, you are probably charged VAT on most of the goods and services you buy. That means charging your customers VAT, keeping VAT records and paying the VAT you’ve collected to HMRC.There are three rates of VAT that can be applied, depending on the goods or services provided.

They are:

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Businesses add VAT to the price they charge when they provide goods and services to:

  • business customers – for example, a flower wholesaler will add VAT to the amount they charge a florist
  • non-business customers – for example, a beauty salon will include VAT in the price they charge to their customers

There are some goods and services that are exempt from VAT, such as dental services, and non-business activities, such as hobbies are outside the scope of VAT.

How will I know when to register for VAT?

If you’ve just started in business, or you have a relatively low turnover, you are not required to register for VAT. This means you can’t reclaim the VAT you pay when you purchase goods and services.

You will need to register for VAT if:

  • your business grows, and your annual sales of ‘taxable’ goods and services reach the £79,000 VAT threshold, or,
  • you expect a taxable turnover of more than £79,000 in the next 30 days alone.

Registering for VAT means that you need to charge your customers VAT. But if your customers are VAT-registered businesses, they can reclaim the VAT you have charged and it also means that you can reclaim any VAT you pay, so reducing your costs.

Rather than paying HMRC all the VAT you collect from your customers, you first deduct the VAT you have been charged on the business supplies you have bought.

Even if you are under the VAT threshold, registering for VAT might boost your profits and can give your business the appearance of being bigger and more established.

I’ve already registered for VAT, what next?

Once you’ve registered for VAT you will need to start keeping VAT records – details of the VAT you have been charged and the VAT you have charged your customers.

If your business is VAT-registered, you should:

  • charge VAT on the goods and services you provide, and
  • reclaim the VAT you pay when you buy goods and services for your business.

Follow these simple steps to get started:

  • Check with your accountant or HMRC what rate of VAT applies to the goods and services you sell
  • Find out which accounting scheme will be best for your business
  • Use HMRC approved accounting software to help you handle VAT record keeping, invoicing and online VAT returns

If you haven’t registered, continue to keep track of your taxable turnover so that you know when to register for VAT.

Want to know more about VAT?

Accountant and Acctech Business expert, Georgi Rollings, looks at the pros and cons of registering for VAT on the blog, or head to www.hmrc.gov.uk/vat for more detailed information.

We can help with all aspects of VAT from providing advice and information along with software to help you manage all your VAT processes giving you more time to focus on growing your business.