You usually submit a VAT Return to HM Revenue and Customs every 3 months which is known as quarterly return. Vat return will show your total sales and purchases and the amount you owe or can reclaim from HMRC.
You still must submit a VAT Return even if you have no VAT to pay or reclaim.
What can you charge VAT on?
- Selling, hiring, loaning goods and providing services
- Selling business assets
- Business goods used for personal reasons
Please note, that you can only charge VAT if your business is VAT registered. You may then reclaim any VAT that you have paid on allowable business expenses.
To charge right amount of VAT, you need to be aware of 3 different rates:
Standard rate – most of the goods and services provided are at standard rate, which is 20% in the United Kingdom.
Reduced rate – there are some goods and services on which you are charging/paying less VAT for example domestic fuel or power are charged at 5%. For some goods rate depends on the circumstances of the sale, for example mobility aids are charged at 5% if they are for someone over 60 and installed in their home.
Zero rate – some goods are rated as 0% such as books, newspapers, children’s clothes and shoes. However, you still need to record them in your VAT records.
List of goods and services at charged rate is available on HMRC website.
Standard – this is the most popular schemes of all. The submissions are made quarterly. The difference between output and input of Vat is paid to HMRC or refunded to you. The payment is made 5 weeks after the end of the quarter
Flat – you pay fixed rate of VAT to HMRC. This scheme works on calculation a percentage of your gross turnover. There are different rates depending on the type of the business you are in. The rates can be viewed on HMRC website. To stay on the scheme, your turnover needs to under £230,000 in a 12 month period.
Annual – declaration of Vat is only once a year instead of four. Payments however are made monthly or quarterly. At the end of the year, VAT return needs to be submitted within two months following the end of the annual accounting year, together with any outstanding balance. If there was an overpayment, HMRC will refund you the excess.
Cash – this system is very popular with businesses which gross turnover is less than £1,35 million in 12 months period. Vat is calculated based only on the invoices and purchases that has already been paid for.
How we can help
You may appoint an agent (accountant) to deal with HMRC on your behalf to help you with all the issues related. We can help you with the following:
- Registration and de-registration
- Choosing the right VAT Scheme
- Maintain VAT records
- Submissions of VAT returns
- VAT inspections
Making Tax Digital
From 1 April 2019 any Vat registered business needs to use cloud accounting software to be able to hold their relevant accounting records and consequently make Vat submission to HMRC.
Over the last year we have been busy with introducing the new cloud accounting systems to our existing and new clients. If your time is precious to you give us a call so that we can guide you through with the most suitable accounting software, training and set up so that your business is ready for new changes of Making Tax Digital.
FIND US AT:
Stockport, SK5 7DL