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VAT (Value Added Tax)

Value Added Tax (VAT) is a consumption tax on most goods and services provided in the UK or imported from other EU and non-EU countries. The VAT rates are as follows: standard – 17.5 per cent (20 per cent from 4 January 2011), reduced – 5 per cent and zero – 0 per cent. Some goods and services are exempt from VAT. It depends on the particular goods or services supplied which VAT rate should be applied for a business transaction.

 

Only as a VAT-registered business you are entitled to:

  • Charge VAT on goods and services provided.
  • Issue VAT invoices.
  • Reclaim the VAT paid on goods and services.

The registration with HMRC for VAT is

 

Compulsory: if your limited company’s turnover for the previous 12 calendar months has exceeded the VAT threshold which is £70,000 in 2010-11, or you are convinced it will be over this level soon.

 
Voluntary regardless of your turnover, if you judge the VAT registration as desirable for your limited company, for instance because you want to issue VAT invoices or reclaim VAT on your purchases.

 

A VAT-registered company has to:

  • Choose a VAT accounting scheme to account for VAT. HM Revenue & Customs operates various VAT accounting schemes designed for specific trades and business situations. The most popular are:
    – Standard Accounting Scheme where you have to submit your VAT tax return to HMRC quarterly.
    – Annual Accounting Scheme where you pay VAT on account in nine monthly or three quarterly instalments. You need to complete only one VAT tax return at the end of the tax year and if necessary make balancing payments to HMRC or claim refund.
    – Cash Accounting Scheme where you have to account for VAT to HMRC only on the invoices actually settled.
    – Flat Rate Scheme where you pay a flat rate percentage of your turnover as VAT without having the right to reclaim VAT paid on purchases.
    – VAT scheme for retailers.
  • Issue VAT invoices with a correct VAT rate every time you sell goods or services to either another businesses or individuals.
  • Complete and submit VAT tax returns to HM Revenue & Customs in accordance with the VAT Accounting Scheme chosen.
  • Pay VAT to HMRC in accordance with the VAT Accounting Scheme chosen.

If you want to cancel your VAT registration, you must inform HMRC about the reasons for this decision. To formally cancel your VAT registration you have to use form VAT 7.

 

Capital Business Links Ltd will be happy to assist you in registering for VAT, keeping your VAT books and completing your VAT tax returns. You can learn more about our VAT offer for limited companies (ltd) by contacting us on the telephone number 0208 567 99 44 or at our e-mail address.