HM Customs and ExciseVALUE ADDED TAX (VAT)

What is VAT?

Value added tax (VAT) is a consumer tax. It is collected by VAT registered traders on their supplies of goods and or services. Each trader pays VAT on goods and services acquired for the business and charges VAT on goods and services supplied by the business. The difference between the VAT charged by you and the VAT you were charged must be paid to the HM Revenue & Customs. If the amount of VAT paid by you exceeds the VAT charged by you the H M Revenue & Customs will repay you the excess. This ensures that VAT is paid by the ultimate customer and not by the business.

Who must register for VAT?

You must register for VAT if you are a taxable person and your annual turnover has exceeded £85,000 in ANY twelve month period or is likely to exceed this amount in the following month.

When should I register for VAT?

As soon as you have reached the limits set above you must register. You can, if you wish, register any time before this but this is voluntary.

How do I register for VAT?

To register for VAT you can complete the on line registration. You can only register if you have commenced business or you are about to in which case you must show evidence of your proposed commencement.

What rate is VAT charged at?

The standard rate of VAT is 20%. This applies to all goods and services that are not exempt or liable at the zero or reduced rates.

Reduced and zero rated goods applies to certain goods such as fresh foods, domestic fuel,certain books....etc.

When must I account for and pay VAT?

If you are registered the H M Revenue & Customs will send you a notice to complete a Vat Return form on line, every three months. You must complete this form giving details of:

  • VAT charged by you for the period
  • VAT paid by you for the period
  • VAT payable or repayable for the period
  • Net value of goods and services supplied by for the period
  • Net value of goods and services acquired by you for the period

You must submit the form on line to the H M Revenue & Customs by the end of the following month of the period end plus seven days, e.g. the form for the period ended 31 March must be received by the HM Revenue & Customs by 7th May. Any Vat payable must be paid electronically by the same date, however if you arrange for the payment to be collected by the HM Revenue & Customs via direct debit, it would be taken from your account 3 working days after the 7th, typically on the 10th unless near a weekend or public holiday.

How do I claim a repayment?

If the VAT you incurred by you exceeds the VAT charged by you you will be due a repayment of VAT. Once you have returned the form as above the repayment will be paid directly into your bank account via electronic transmission.

Must I keep special records for VAT?

You must keep your books and records in such a way that your VAT position can be clearly established. This will not generally involve keeping separate records for VAT purposes.

In addition to having books of account which are properly written up and balanced on a regular basis, you must also keep all invoices, bank statements and all other supporting documentation relevant to establishing your VAT position. All these records must be available for inspection by a H M Revenue & Customs officer. You can expect a visit by an officer at any time. All records must be kept for at least six years.

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