VAT (Value Added Tax) is a tax added to most products and services sold by VAT-registered businesses. Businesses have to register for VAT if their VAT taxable turnover is more than £90,000 (up from £85,000). They can also choose to register if their turnover is less than £90,000.
VAT, which stands for Value Added Tax, is a consumption tax levied on the sale of goods and services in the United Kingdom. It is an indirect tax that is ultimately borne by the end consumer, but it is collected and remitted to the government by businesses at each stage of the supply chain. The current standard rate of VAT in the UK is 20%, although some goods and services are subject to reduced rates or are exempt altogether.
Registering for VAT
In order to collect and remit VAT, businesses in the UK need to register for VAT with HM Revenue and Customs (HMRC), unless turnover falls below the VAT registration threshold (currently £90,000) of taxable turnover over a 12-month period.
To register for VAT, an individual or organization must complete the VAT registration process with HMRC. This can be done online through the government's online service and the team at L J Rose Accounting provide this as one of the services offered to clients. During the registration process, information about the business, such as its legal structure, address, turnover, and details of any goods or services being supplied, will need to be shared with HMRC. They will also need to choose the appropriate VAT accounting scheme and the effective date from which VAT registration will apply.
Keeping Records
Once registered for VAT, businesses are required to charge VAT on their taxable supplies, keep detailed records of their sales and purchases, and submit regular VAT returns to HMRC. VAT returns typically cover a specific period, usually quarterly, and they include information about the VAT charged on sales and VAT paid on purchases. If the VAT collected on sales exceeds the VAT paid on purchases, the business will need to pay the difference to HMRC. Conversely, if the VAT paid on purchases exceeds the VAT collected on sales, the business may be eligible for a VAT refund.
Businesses need to use compatible, HMRC-recognised MTD software to keep digital records and file VAT returns. L J Rose Accounting is a Xero software Platinum Partner and recommends Xero for this purpose.
It's important to note that VAT regulations can be complex. Consult with our qualified team at L J Rose Accounting to ensure compliance with the applicable rules and to maximize any potential VAT benefits.
Lisa and the L J Rose Accounting team offer a wide range of accountancy services including VAT registration and Making Tax Digital compliant filing .
Book an appointment to discuss your VAT requirements with Lisa.
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