What is VAT?

Value Added Tax (VAT) is a consumption tax levied on goods and services in many countries around the world.

Should I be VAT-Registered?

If your taxable supplies are above £77,000 (from 1 April 2012) at any time over a rolling 12 month period, you must become VAT registered. There are exceptions which will allow you exemption from VAT registration if your supplies are over £77,000 providing you meet specific HMRC criteria.  If your supplies are less than £77,000, you may voluntary register for VAT enabling you to recover input tax, but you must remember to charge VAT on your sales.

What if I register late for VAT?

If you are late notifying HMRC that you should be registered for VAT, you will still have to pay all the VAT due from the time that you should have been VAT registered from. This means you may have to pay VAT to HMRC which you have not charged your customers.

HMRC may also charge a late registration penalty and/or a failure to notify penalty if you did not notify HMRC at the correct time.

Can I Recover ALL Pre-Registration VAT?

VAT can be recovered up to four years prior to VAT registration on capital assets and stock which is still on hand at the time of VAT registration. VAT paid for services received up to six months before the date of registration date can usually be deducted.

How often are VAT returns submitted?

VAT returns are completed and submitted to HMRC every 3 months, but HMRC will allow an annual VAT return to be submitted.  If your business receives payments from HMRC on a regular basis HMRC will allow VAT returns to be submitted on a monthly basis.

Which VAT Scheme I can use?

HMRC have a variety of scheme designed to help business ranging from the Flat Rate Scheme, Cash Accounting, to Annual Accounting, all of which can help achieve cash flow savings, but each scheme has specific joining criteria and specific conditions to be fulfilled.

Are there schemes available for retailers?

HMRC have a number of retail schemes each tailored to suit business and their operating procedures, these schemes include, point of sale, apportionment and the direct calculation scheme.

Can you Claim the VAT on Road Fuel?

You can recover the VAT on fuel purchased for commercial vehicles, but if you purchase fuel for cars you will only be entitled to recover the VAT on business journeys using detailed mileage records to support apportionment of the input VAT, or pay the fuel scale charges and recover all the VAT.

What should a VAT invoice include?

A VAT invoice must include:

  • An invoice number which is unique and follows on from the number of the previous invoice
  • The seller’s name or trading name, and address
  • The seller’s VAT registration number
  • The invoice date
  • The time of supply if this is different from the invoice date
  • The customer’s name or trading name, and address
  • A description sufficient to identify the goods or services supplied to the customer
  • The quantity of goods or the extent of the services
  • The unit price or rate, excluding VAT
  • The rate of VAT that applies to what’s being sold
  • The total amount payable, excluding VAT
  • The rate of any cash discount
  • The total amount of VAT charged

What if I make retail sales or sales of less than £250 including VAT?

If you make retail sales and you make a sale of goods or services for £250 or less including VAT you can issue a less detailed VAT invoice, which will include;

  • The seller’s name and address
  • The seller’s VAT registration number
  • The time of supply (tax point)
  • A description of the goods or services
  • The total price including VAT
  • The VAT rate applicable to the item

Are my VAT Liabilities Correct?

Many businesses have complex VAT liabilities (e.g., printers, construction companies, charities, take-away food outlets). If you are not sure of the correct VAT rate it essential to have them reviewed to make sure you are not at risk from a potential challenge from HMRC and a future VAT assessment.

How can I avoid regular VAT inspections?

Be compliant. Keeping up-to-date VAT records, submitting and paying VAT returns on time, and disclosing errors as soon as they are found will avoid regular visits from HMRC.