VAT Returns Service

Handling Your Value Added Tax so you don't have to.


Financial Employee

VALUE ADDED TAX RETURNS

TRUSTED COMPLIANT AFFORDABLE

If your business is big or small, we are here to help you with your VAT needs. We can advise you whether to register for VAT, and how much you should pay as it is variable, and work alongside you to help you make as many savings as possible.

Why should I register for VAT?


As with all taxes, if you underpay or pay late you may receive penalties and fines. If you do not get your VAT return in by the deadline or underpay you will default, and enter a 'surcharge period'. This period can last up to 12 months. If you default again in this period the 'surcharge period' can be extended by another 12 months and the you may have to pay a fine, or surcharge on top of the VAT outstanding. This is outlined below.

Surcharges

This can be avoided by paying your VAT on time, having no VAT to pay, or if in fact you are owed a VAT refund from HMRC.

Any surcharges applied to your VAT account will be a percentage of the VAT outstanding from the period in default. This surcharge rate will continue to increase should you continue to default on your VAT returns. The table below shows any surcharges and the percentages you can incur.

Defaults within 12 months Surcharge if annual turnover is less than £150,000 Surcharge if annual turnover is £150,000 or more 2nd No surcharge 2% (no surcharge if this is less than £400) 3rd 2% (no surcharge if this is less than £400) 5% (no surcharge if this is less than £400) 4th 5% (no surcharge if this is less than £400) 10% or £30 (whichever is more) 5th 10% or £30 (whichever is more) 15% or £30 (whichever is more) 6 or more 15% or £30 (whichever is more) 15% or £30 (whichever is more)

Penalties

HMRC may also apply penalty charges, this can be up to:

  • 100% of any tax over claimed or not stated if it can be shown to be a deliberate error to defraud HMRC.
  • 30% of an assessment if HMRC themselves makes an error and sends you one that is not high enough and you do not inform them within 30 days.
  • £400 if your VAT return is submitted in paper, unless you already have permission from HMRC not to do it online.

So as you can see it is important for you and your business to pay your VAT correctly.

When should I register my business for VAT?


Business' must register for VAT once their annual turnover is in excess of the VAT threshold, this currently stands at £85,000 per annum. At present the VAT threshold, which would allow you to apply for de-registration from VAT, stands at 83,000 per annum. This can change with each new budget. If your business exceeds the threshold you need to be VAT registered and make VAT payments to HMRC. HMRC will inform you of when these payments must be made, yet for many business these payments are quarterly.

Is VAT Variable?


It really depends on what your business is doing which determines how much VAT you change. Again, this can change with every budget from successive governments. However, if your business is selling goods or services, you are most likely going to have to pay HMRC VAT. VAT can vary depending on what you sell, our professional accountants are here to make sure you do not make any mistakes, and thus incur charges and penalties. Or indeed do not overpay, so our accountants should be able to save you money.

What is flat rate VAT?


Paying VAT can become a huge task for many business'. If your business has a turnover of £150,000 or less the Flat Rate Scheme may be best for you. This may well change, however our accountants will ensure that you are kept up to date with any changes and find the best scheme for you.

The flat rate scheme allows business' to pay a fixed rate VAT return. This VAT return is worked out as a percentage of gross turnover, this percentage is then payable to HMRC, usually quarterly.

Small business' operating under the Flat Rate Business Scheme will still have to charge VAT as normal to their customers, issuing VAT receipts as standard.

Under this scheme paying VAT to HMRC should be much easier, as your business will apply a percentage to the VAT inclusive value of your sales.

This will then be paid to HMRC, usually quarterly.

Pro's and Possible Cons of the flat rate VAT Scheme


The whole process should b more straightforward for small business'. As a small business you will have to apply a fixed percentage of VAT to your VAT inclusive sales and send the money to HMRC.

Whilst the whole process is simplified, there are other advantages to the Flat Rate Scheme.

It can enable some small business' to save money by paying HMRC a lower rate of VAT, set at 20% currently, which can be added in charges to their customers.

An example of this could be a restaurant, all customer will pay 20% VAT which will be included in their bill. However, under the Flat Rate Scheme the restaurant would only have to pay 12.5% VAT to HMRC. Therefore making the restaurant a saving.

However,under the Flat Rate Scheme, you pay a fixed amount on the revenue you take. Your companies outgoings cannot be offset against this, and as a company you will be paying VAT to other companies to buy in your stock.

As discussed before VAT is variable, on luxury goods, and other items such as alcohol. Under the flat rate scheme this restaurant would not be able to offset these costs against what they have taken, so it may not in fact be the best scheme for the restaurant.

Our accountants will work with you to ensure you get the best VAT scheme for your business.

Are there different flat rates of VAT for different sectors or business types?


Absolutely, the rate of VAT a business pays under the flat rate scheme varies.

This is dependent upon the business type, or the goods or services you provide.
For example, the VAT a restaurant pays under the flat rate scheme is 12.5%, yet for accountancy or bookkeeping it is 14.5%.

For a full list of the flat rates for different businesses click here.

How do I register my business for the VAT Flat Rate Scheme?


For a business to apply for the Flat Rate Scheme certain eligibility criteria must be met:

  • Your business must be VAT registered.
    If your business' turnover is under the mandatory registration threshold of £83,000 you may choose to register voluntarily.
  • The turnover of your business must be £150,000 or less.
  • Your business must sell services or products that are taxable under the VAT scheme.
  • Your business can not have left the Flat Rate Scheme in the 12 months prior to your registering for the scheme.
  • Your business can not be part of a Capital Goods VAT Scheme or a margin.
  • Your business may not be allowed to be 'closely associated' with another business or company.

If your business meets these eligibility criteria it can apply for the Flat Rate Scheme, for more clarification on this please feel free to contact our accountants here.

Why should I separate the VAT received from other monies received?


As accountants we often find that some clients do not separate their VAT money from the revenue received.

We would advise our clients to be diligent about doing this, perhaps even setting up a separate bank account where they transfer the VAT money weekly or monthly.

In the past, when people haven't done this we have found that business have accidentally used the VAT money for other business purposes.

This can lead to arrears with HMRC which can incur penalties.

As payments to HMRC are usually quarterly then it is possible that there may not be enough money to pay HMRC.

HMRC will pursue these payments as previously discussed which can incur penalties and charges.

It is much better to not even view VAT as your money right from the off, and set it to one side so that you can meet your obligations to HMRC.

Accounts Package and Online VAT


It can be sensible to do your VAT returns yourself, especially if they are fairly straightforward.

Our team can talk through your options with you and will also work with you to find the best option for you.

Using bookkeeping software can make this process even easier, and often it will work out your VAT for you electronically.

However, these software packages can be expensive and even then mistakes can be made.

VAT can be a complicated area, for many business' outsourcing your VAT returns to professionals can make this whole process easier and accurate.

Our professional team of accountants and bookkeepers are on hand to help.

Should I deregister for VAT?


Currently the threshold for mandatory enrollment in the VAT scheme is set at £85,000 per annum, if your business' turnover falls below this threshold it can be beneficial to de-register for VAT, although this is not always the case.

If you have queries regarding this process and whether it is beneficial for you to de-register for VAT contact our professional team, we are here to help.

VAT inspections


VAT inspections can and do happen

It can happen at any time to any type of business.

Often you will receive hardly any notice from HMRC of an impending inspection, when it arrives, you must be fully cooperative with HMRC as they will look deeply into your records.

Even if you pay your VAT on time it and keep accurate records, they can still turn up for inspection.

Our clients feel much happier knowing that accountants have prepared their books for them and completed their VAT returns.

Our accountants will be on hand to support you and advise you throughout this process and also if the inspection becomes an investigation.


Issues arising with VAT


  • Sometimes VAT may only be recovered on the business side when goods and services are bought for either business or non-business purposes.
  • When entertaining clients or suppliers, the VAT here can not be reclaimed.
  • Discounts - if you allow a discount on any of your services or goods, errors can arise, because sometimes people calculate the VAT owed to HMRC on the original price, when actually it should have been less because of the discount applied.
  • Credit to customers - often it is the invoice that HMRC use to determine how much VAT is owed. It is possible that your customer may not have paid you yet or is refusing to pay. That money is still owed to HMRC as they assume that it will be.

Frequently Asked Questions About VAT


What is VAT?

VAT means Value Added Tax, and it is a tax on consumption. If you sell good s or services VAT must be applied, included in your price, and sent to HMRC.

When do I need to register for VAT?

Your business must register for VAT once it's turnover is at or exceeds £85,000 a year.

What can I reclaim VAT on?

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
What items are zero rated?

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.

What is the VAT rate for 2018?

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.

Is VAT payable on turnover or profit?

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.

How do I calculate VAT tax?

To calculate VAT at the basic rate you need to divide he 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.

Who pays value added tax?

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.

How much can you earn before paying VAT?

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

Do I need to pay VAT as a small business?

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.

Does turnover include VAT UK?

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.

Do Universities pay VAT?

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.