R A Lister Ltd

Chartered Accountants in Wakefield, Yorkshire

Phone Number: 01924 291 388

VAT

Value Added Tax (VAT) is familiar to almost everyone. However, when it comes to businesses, the interpretation and knowledge of VAT should be deeper and exceed the knowledge that you simply "pay more". As a matter of fact, the way your business handles VAT makes the difference between whether the business is legally running or illegally running.

planning for vat return

How To Submit Vat Return?

By definition, VAT is a form of consumption tax, which is tax imposed on services and goods on purchase as well other taxable supplies. The consumer is ultimately responsible for paying VAT, hence it cannot be defined as tax imposed on personally owned businesses. VAT is paid to HMRC, but the actual payment has already been made by customers who purchased services and goods. Therefore, VAT becomes a form of indirect tax and businesses are required to fully report to HMRC. 

Within UK businesses, taxable areas include:

  • Sales of your goods and/or services
  • The sale of business assets
  • Staff costs
  • Commission
  • Business goods you use personally
  • Product exchanges
  • The hire or loan of your goods 

What is VAT Threshold? Do I Need to Register my Business?

If your annual turnover exceeds £85,000, legally you are supposed to register for paying VAT. You will be needed to impose VAT for every goods or services which your business offers since you are only allowed to charge VAT if registered. The registration will also give you the power of reclaiming VAT on services and goods bought by the business you are running. 

The VAT which your business charges is calculated based on the full value of the sale. The tax must be imposed on sales, whether you operate fully on exchange or if you work on part-exchange basis. In case you do not include the tax in the charges your customers pay; the HMRC assumes the price is inclusive. 

Businesses registered for VAT must give a report of total VAT charged and received from the business by HMRC through filing a return every quarter. The filing is compulsory even when there is no VAT charged. If there are any VAT over-charges to the customers it must as well be submitted to the HRMC and also in case of paying more than charged, the business should also reclaim from HRMC.