business: VAT registration going VAT registered We take a closer look at the process of VAT registration.
Owning your own business brings many exciting opportunities, yet also holds the proprietor accountable for a number of financial and legal responsibilities.
When it comes to understanding the world of tax, the subject matter can seem daunting and confusing.
Even though we’re all familiar with seeing the acronym ‘VAT’ on a daily basis, few of us truly comprehend the topic. However, as a business owner, understanding the fundamentals of the system is vital. Indeed, if you find your annual turnover exceeds the threshold set by HM Revenue & Customs (HMRC), then going VAT registered is a mandatory requirement.
what is VAT?
“VAT (value added tax) is a tax businesses charge when they supply goods and services in the United Kingdom or the Isle of Man,” explains Glen Wood, Director of Stopfords Associates, who specialise in chartered accountancy and business development services. “It is also charged on goods and some services that are imported from places outside the European Community, and on some goods coming into the United Kingdom from another EC State.”
At present, the VAT rates for goods and services are as follows:
• Standard rate - currently 20% on most supplies of goods and services
• Reduced rate - currently 5% on supplies of fuel and power in the home and also on some property conversions and some other supplies
• Zero rate - 0% examples of this include most food (but not meals in restaurants, cafes and hot take-away food and drink), books and newspapers, young children’s clothing and shoes and also ‘new build’ dwellings.
“In addition to the above rates, there are also exempt supplies which have no VAT
charged on them and are not included as taxable supplies,” says Glen. “Examples of exempt supplies include: insurance; betting, gambling and lotteries; providing credit; certain education and training, and the services of doctors and dentists.”
when should I go VAT registered?
One of the most common financial quandaries many small business owners face is exactly at what point they need to register for VAT.
“You can register for VAT as: a sole proprietor, a partnership, a limited company, a club or association, or a charity,” states Glen. “You are not obliged to register for VAT until your annual total of taxable supplies exceeds the VAT Registration Limit – £82,000 from 1st April 2015 (previously £81,000).
“You must register if at the end of any month the total value of taxable supplies you have made in the past 12 months or less exceeds the limit. Also, if at any time you expect that the value of your taxable supplies to be more than the limit in the next 30 days.”
If you meet these criteria, then the main change you will have to accommodate, once registered, is the addition of VAT to your goods and services, which means an increase of 20% to your prices. Once collected, this extra income is then paid to HMRC.
As a VAT registered business, you will also be able to reclaim VAT on purchases you have made from other VAT registered businesses.
In addition, you also have the option to voluntarily register for VAT even if your annual turnover falls below the £82,000 threshold, as Glen details: “Even if your taxable services are below the limit you may choose to register for the following reasons:
• If you register you can reclaim the VAT on purchases specifically made for the business.
• If you register after starting up in business, you can claim back a substantial amount of VAT charged on goods and services that you use to set-up your business, with certain conditions. Normally this will include goods/assets you bought for your business, which you have not yet sold and also VAT on services which you received not more than six months before your date of registration. Such VAT should be included on your first VAT return.”
“There are however downsides to registering prior to reaching the threshold,” notes Glen. “You will have to charge your customers VAT which will increase your prices and reduce your competitiveness, particularly if many of your customers are the general public. You will [also] incur the extra administrative burden of maintaining VAT records and submitting returns (at least quarterly).
“In particular, you should consider voluntarily registering if you sell to other registered traders or you sell zero rated goods.”
140 GUILD NEWS
Image ©
iStock.com/LarsZahnerPhotography
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156
