VAT

What Is VAT

Value Added Tax (VAT) is the tax payable to HMRC on Sales of vatable Goods & Services provided less any VAT suffered on vatable purchases.

All businesses that exceed the annual VAT turnover threshold (£85,000 for 2020), must register for VAT and charge VAT on its sales. In addition, a Quarterly VAT return must be submitted to HMRC along with the VAT payable.

VAT in UK is typically charged at 20% on goods and services sole, ho.wever certain goods and services (e.g. Children’s car seats, radiators etc) can have completely different VAT rates.

Businesses (that supply vatable goods or services) can also choose to voluntarily register for VAT. There are various benefits of being registered for VAT, as they can claim VAT suffered on purchases or some businesses can be in a VAT refund position.

Our VAT returns Service

We don’t like waiting till the deadlines, we make sure things are ready for submission well before time so that nothing can go wrong at the last minute. You will even have time to double-check or have us double-check it for you.

You dedicated accountant who will have a good understanding about your business will review your VAT return and submit to HMRC. We will provide the relevant VAT returns reports and any amount that you need to pay.

We will also advise you on EU/EC sales based on your accounts and their position. Handling your finances gives us the knowledge to advise you on such matters so all your business decisions can work out for you.

Flat Rate VAT Scheme

The flat rate VAT scheme is designed to help small businesses reduce the amount of time they spend accounting for VAT. Using the flat rate scheme, you do not have to calculate the VAT on each and every transaction. Instead, you simply pay a flat rate percentage of your turnover as VAT. The percentage is less than the standard VAT rate because it takes into account the fact that you are not reclaiming VAT on your purchases. There is a range of flat-rate percentages – the one you use depends on your trade sector. Although the flat rate scheme can reduce your paperwork, one downside is that you cannot reclaim VAT on your purchases. If you buy a lot of goods and services from VAT registered business, you could end up paying more VAT. Also, if you make a lot of zero-rated or exempt sales, you could end up paying more VAT because you will still be liable to pay the flat rate percentage on your turnover for those sales, even though you are not charging VAT on those sales.

Flat rate schemes are therefore useful for service-orientated industries such as Consultants, contractors etc or businesses with very small number of vatable purchases.

Standard VAT Accounting

Standard VAT accounting allows you to reclaim VAT that you may have had to pay on your purchases. You will pay or reclaim the net of the VAT that you have charged your customers and the VAT that you have had to pay on your purchases.

Standard method follows the accrual basis of accounting; this means that your VAT calculations will be based on your raised invoice rather than the date the invoice was paid.

This could have a negative cash flow effect on your business since you have to pay VAT over to HMRC for services or goods sold, which you have not yet received the money for. On the contrary, if you have not paid for goods purchased, you can claim the VAT on the invoice received, resulting in a positive impact on your cash flow.