VAT registration feels complicated, but it doesn’t have to be – here’s what you need to know
Businesses must register for VAT (Value Added Tax) if their taxable turnover (sales/services) is more than £90,000.
Businesses can also choose to register if their turnover is less than £90,000, this could be because it is a requirement of your main customer, or your turnover is close to the threshold and you are worried you may miss the deadline.
Once you are VAT-registered you have certain responsibilities’
You must:
- Include VAT in the price of ALL goods/services and at the correct rate
- Complete a VAT return – usually every 3 months
- Make sure you pay HMRC the VAT due
- Keep records of how much VAT are on your expenses
- Account for goods you import into the UK
I would recommend using a computerised system that integrates with the HMRC VAT return system. HMRC allows you to use an agent to take care of the returns for you, we would be able to act as your agent and make all the necessary checks for errors before submitting the return.
VAT Schemes
In most cases the VAT you pay is the difference between the VAT on sales and the VAT on purchases, but there are some VAT schemes available, which in some cases could reduce you VAT bill.
VAT Flat Rate Scheme
This scheme allows you to pay the VAT on a % of your gross turnover. This scheme might suit a business where most of their purchases are not vatable, for example a cafe, who’s main purchases are food. Talk to us to find out if the flat rate scheme is right for you.
The rules
- You can use this scheme if you are a small business with an annual taxable turnover of £150,000 or less
- The % depends on the industry you are in and the type of business
- You cannot reclaim VAT on any purchases/expenses
VAT Annual Accounting Scheme
You may be able to use this scheme if your taxable turnover is £1.35 Million or less.
Instead of submitting your VAT return quarterly, you would submit it once on a yearly basis, however HMRC do require you to make an advance payment based on last years returns and therefore I would not recommend this method to my clients as the money is better in your bank than HMRC’s bank!
VAT Cash Accounting Scheme
Again, you may be able to use this scheme if your taxable turnover is £1.35 Million or less.
The normal way of keeping accounts is on an accrual basis, which means you account for all sales invoices and expenses/purchases at the invoice date.
The cash accounting scheme allows you to account for your VAT when you are paid and when you pay your suppliers. This is useful if you are using cash accounting for your bookkeeping and can be beneficial to a business with longer payment terms with their customers.
In many cases the main VAT return is best for most businesses but if you would like us to look into a scheme for you, we are happy to help.
I hope this blog has been helpful, please send us feedback to let us know what you thought.
Whatsapp or phone: 07510 914616 email: michelle@hislopbusinesssolutions.co.uk
