Registration and Returns
VAT, or Value-Added Tax, is charged on most of the goods and services traded in the UK, and some from abroad, too. It applies to businesses whether they’re trading to individual customers or other companies. It’s a way for the government to collect yet another tax and get you to do all the work, but at least if you are a VAT-registered business you can generally claim back VAT that has been paid for materials or other goods. Depending on your business, if you aren’t registered, you might be missing out.
Not all goods and services are treated equally when it comes to VAT, with some having a lower rate applied and others being exempt altogether. It’s a fine line sometimes – a cake is zero-rated even if it is covered in chocolate, whereas a biscuit is 20% VAT rated even if it is wholly or partly covered in chocolate. So it’s definitely worth staying on the ball when it comes to the rates that apply to your business.
If you do register for VAT, there’s some paperwork to keep up with. You’ll need to fill in a VAT return, usually each quarter, and let HMRC know both the amount of VAT that you’ve charged on sales and the amount you’ve paid out on your own purchases. Once the numbers are crunched, you’ll either get a bill or a rebate, depending on the difference between what you’ve charged and what you’ve paid.
While you’re generally free to register your business for VAT even if you don’t have to, there are situations in which it’s compulsory. Basically, if you’re dealing in goods or services that VAT applies to, you’ll need to register if your turnover for the last twelve months has hit the so-called “VAT threshold” (currently £81,000), or if you expect it to do so any time soon. As with all tax-related matters, solid guidance goes a long way toward making sure you never miss out or get tripped up.
At Innspired Licensed Trade Accountants, taking care of your VAT registration and returns is just one of the things we do to protect and support your business.
No two businesses are exactly alike, so the advice we give is always tailored to the specific situation you’re in. However, to get you started, here are a few general questions that sometimes crop up.
Can I claim back VAT when I arrange accommodation, food or entertainment for a client or potential customer?
Generally, no. HMRC considers these expenses “business entertainment” and won’t let you claim the tax back. There are a couple of nit-picky exceptions, but they’re pretty specific.
Can I claim back VAT for motor fuel if my vehicle is also used for non-business journeys?
This depends on a number of factors, for example if you are Sole Trader or Limited Company, who own the vehicle, etc. We can discuss your situation with you.
What about free samples or trials? Do I need to charge VAT on these?
As long as the samples or whatever, are genuinely given away free, and for business purposes, you won’t need to charge VAT on them. Also, you don’t need to account for business gifts given to customers, as long as the cost of what you give to any one person isn’t over £50 in any twelve-month period.
Are there any situations where I can’t register for VAT?
You can register as long as you’re trading in something that counts for VAT, and HMRC considers you to be “in business”. Running a one-off jumble sale in your front garden won’t get you registered, for example – but if you do it regularly and are buying in stock to sell, you’re in business. VAT can be complex so talk to us about your specific business set up.
Flat Rate Scheme?
The flat rate VAT scheme is an incentive provided by the government to help simplify taxes and means you charge VAT on your invoices at 20% (2014 rate) but only pay back HM Revenue and Customs at a lower rate, for Public Houses (rates differ depending on your profession/trade – see table below) the rate in your first year is just 5.5% of the gross amount and 6.5% in subsequent years (you receive a 1% discount in your first year)
Need help with VAT for Pubs ? Call our VAT Department on 01246 233108 to talk about different VAT Schemes