All things VAT

So the world of VAT can at times be confusing so I was compelled to come up with a basic guide. So let's start from the basics....

What is VAT?

VAT is essentially a sales tax and if you are VAT registered you will have to 'collect' 20% above your selling price. To add an extra complication not all items are zero rate such as children's clothing where no VAT should be collected. It is definitely worth having a glance over the list below that details the VAT rates on different products.

When to register?

So for most businesses this will be when you go over the VAT threshold (this is currently 85,000). There are other circumstances where you would be required to register earlier such as trading with the UK but your company being registered elsewhere (no VAT threshold) or in the case of selling digital products or distance selling. It is the responsibility of the business owner to track when they will go over this threshold. If you know you will go over the threshold in the next 30 days then you should register. You can find all registration documents on HMRC's website.

Voluntary registration?

Around 20% of businesses voluntarily register the reasons for this can vary. This could be reasons as vast as wanting to claim back the VAT on purchases or it might be a that you will have difficulty securing work if not VAT registered.

If you are looking to Voluntarily register then it is strongly advisable to speak to a client before doing so.

What about VAT returns?

With VAT registration comes VAT returns - usually every quarter this can be done online. The VAT return covers the previous three months and will shall all the VAT you have collected from customers for that period. It can also include all the VAT you wish to claim back against purchases your company has made. Should the amount you have paid out in VAT be more than that collected from clients you are entitled to a refund.

VAT Schemes

There are various VAT schemes separate from the standard VAT rate route. The main ones are the flat rate scheme and the cash accounting scheme. If you wish to enter into any scheme other than the standard one we would strongly advise you speak to an Accountant who can advise you of the best fit for your business.

If you have any queries or want further advice please contact us on

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