Handling Your Value Added Tax so you don't have to.
VAT means Value Added Tax, and it is a tax on consumption. If you sell goods or services VAT must be applied, included in your price, and sent to HMRC.
Your business must register for VAT once it's turnover is at or exceeds £85,000 a year.
VAT can be reclaimed on many goods or services. However some of these goods or services are exempt from VAT. Non-UK VAT is non-reclaimable on your UK VAT return. If VAT has not been charged correctly, this is also not reclaimable.
Some items do not have VAT charged on them. For example:All purchases from business or persons that are not VAT registered Bank Charges Insurance Interest Most books Salaries Stamps from the post office Train tickets
When an item is 'zero-rated' they are still taxable under VAT, however the VAT rate is 0 per cent.
Lots of items are considered to be 'zero-rated', for example, books, children's clothing, magazines, cycle helmets, newspapers, industrial protective clothing such as hats and boots, leaflets and pamphlets, brochure printing, building services for disabled people, aircraft maintenance and repair.
On January 4 2011 the Standard VAT rate rose from 17.5% to 20%.
The standard VAT tax is applicable to all sales of services or goods that are not covered by other rates of VAT.
VAT taxable turnover is the total or gross value of all sales that are not currently exempt from VAT.
Your company needs to register with HMRC for VAT if it exceeds the threshold at any point through a rolling 12 month period.
To calculate VAT at the basic rate you need to divide the gross amount by 100 and times it by 20.
So, if you have gross sales of £1000, divide that by 100, which leaves you with £10, which would be equal to 1%. Then multiply that by 20, to obtain 20% VAT, which would be £200 in VAT that you would have to pay HMRC.
The vendor will charge VAT to the consumer, this VAT is then passed on to HMRC.
In the event that the services of goods that are bought are bought by businesses for their clients, they can have the tax they have paid deducted from the tax that is in turn charged to their customers.
The current taxable turnover threshold is £85,000, if your turnover is greater than this you must register for VAT.
You may apply to de-register for VAT if your taxable turnover is less than £83,000
If your business hires out or sells goods and services it will normally have to pay VAT to HMRC.
There are some exceptions to paying VAT, for example, if you sell goods outside of the UK.
If you are VAT registered, you are able to reclaim VAT hat has been paid on your business expenses.
VAT taxable turnover is the gross, or total value, of all goods or services that your company sells that are not VAT exempt.
If your company goes over the current UK threshold of £85,000 in a rolling 12 month period, you have to register with HMRC for VAT. However, if your taxable turnover is less than £83,000 you can apply for de-registration.
A university does not have to charge VAT on goods or services that are provided to lecturers, trainees or pupils.
However, Universities will still have to charge VAT to guests of the University.