It is a consumption tax that is paid on the value added to the cost of a product or service at each stage of its production and distribution. In the UK, it is administered by HM Revenue & Customs (HMRC).
Businesses that are registered for VAT charge VAT on their sales, and they can generally reclaim the VAT they have paid on their business expenses. VAT is an indirect tax, meaning it is ultimately paid by the end consumer but is collected and remitted by businesses throughout the supply chain.
All tax-payable businesses with an income of more than £85000 have to register themselves to HMRC for VAT. However, businesses with lesser income can also register themselves voluntarily for VAT.
A VAT return is a form businesses need to fill out and send to the HMRC. This form includes all the VAT details collected from the consumers and VAT paid to other businesses. They need to send it to the HMRC at the end of every accountancy period, which is three months in general cases.
HMRC has made VAT returns extremely easy with its online systems. You can log in to your account with HMRC and file your returns promptly within the due date. However, you need to take care of the following:
Standard VAT Accounting Scheme: This is the default scheme where businesses calculate and report their VAT liability based on the difference between VAT collected from customers and VAT paid on business expenses.
VAT Flat Rate Scheme: It simplifies VAT accounting for small businesses by applying a fixed flat rate percentage to their total turnover. They keep the difference between the VAT they charge customers and the reduced VAT they pay to HMRC.
VAT Cash Accounting Scheme: This allows businesses to account for VAT based on cash flows, meaning they only pay VAT to HMRC after the payment is received from the customer. This scheme can help with managing cash flow.
VAT Annual Accounting Scheme: Designed for small businesses, it allows them to make advance payments towards their VAT liability on a regular basis throughout the year rather than paying it in quarterly instalments.
VAT Retail Schemes: These schemes are designed for businesses that sell goods directly to the public. They provide simplified methods for calculating and reporting VAT. In these schemes, you can calculate VAT once at the time of your VAT returns rather than calculating it on every sale.
VAT Margin Schemes: These schemes calculate VAT based on the difference between the buying price and selling price rather than the full selling price, taking into account the VAT margin. This can reduce the VAT liability for businesses selling certain types of goods.
Our VAT accountants are qualified, trained and experienced to ensure efficiency in their performance. They will handle every responsibility in a calculated and composed manner. They can:
JJO Accountancy provides complete VAT return services, from HMRC registration to calculation and paperwork. Hire our services and let our professionals take care of this daunting task while you can focus on the core matters of your company.
Yes, If you are providing a service in the UK and your income is more than £85000, you may need to pay the VAT for your business.
If you are running a business where you have to handle all the core matters yourself, it is recommended to hire an accountant to do the complicated VAT calculations and paperwork for you.
No, VAT does not apply to all the products in the UK. There are some products which are partially or completely exempt from the VAT.
You can pay and submit your VAT returns to HMRC digitally through your account on their website.