Value Added Tax (VAT) was first introduced in the United Kingdom In 1973. The standard rate of VAT increased to 20% in January 2011 and is one of the government’s largest source of revenue.
Although the standard rate applies to most goods and services, a reduced rate of 5% applies to home energy, while the zero rate applies to most food and children’s clothes. Postage stamps are exempt from VAT.
For further information on VAT rates click here
When to become VAT registered
Currently the VAT threshold is £85,000 and you must register if your VAT taxable turnover exceeds this although you can also register voluntarily. The VAT taxable turnover is the total value of everything you sell that is not VAT exempt.
It is compulsory to register if:
- You expect your VAT taxable turnover to be more than £85,000 in the next 30 days.
- Or your business had a VAT taxable turnover of £85,000 or more over the last 12 months.
Once VAT registered you must:
With the introduction of Making Tax Digital most VAT registered businesses with a turnover exceeding £85,000 are required to keep digital records from April 1st 2019.
VAT Returns are usually compiled and submitted every 3 months and are still required if you have no VAT to pay or reclaim. VAT registered businesses can reclaim the VAT they have paid on business purchases and expenses although VAT cannot be reclaimed on entertainment expenses and cars, and staff travel expenses have special rules relating to them.
Submitting VAT Returns
VAT Returns are submitted online, in order to submit you will need a VAT number and a VAT online account, if using Making Tax Digital then compatible accounting software should be used instead.
If you would like an agent to submit VAT Returns then they will need to be authorised in order to do so.
The Certificate of VAT Registration shows when the VAT Returns are due, the deadline for submitting the return online and paying HMRC are usually the same. Both are due 1 calendar month and 7 days after the end of an accounting period (VAT quarter).
Paying HMRC VAT
The easiest way to pay HMRC is electronically, for example by direct debit or internet banking.
Other ways to be pay can be found here
If you have any questions on this or another accountancy topic then contact AJR & Co Ltd to arrange a free 30 minute consultation