VAT is charged on most goods and services that VAT-registered businesses provide in the UK. It’s also charged on goods and some services that are imported from countries outside the European Union (EU), and brought into the UK from other EU countries.
VAT is charged when a VAT-registered business sells to either another business or to a non-business customer.
We can help you to register for VAT, choose the right scheme for your business and prepare and submit your returns for you.
For advice with VAT matters please mail us here or call 01952 727177 or 0121 236 7585.
Some more information on VAT
When VAT-registered businesses buy goods or services they can generally reclaim the VAT they’ve paid.
There is a compulsory registration limit if your business turns over more than £79,000 however you can register voluntarily if you turn over is below this level.
Once you are registered for VAT you must;
- Charge the correct amount of VAT
- Pay any VAT due to HMRC in a timely manner
- Submit VAT returns
- Keep VAT records and a VAT account
You must keep your VAT records for 6 years and they may be subject to inspection by a representative from HMRC.
There are three rates of VAT, depending on the goods or services the business provides. The rates are:
- standard – 20% This is the default rate charged on most goods and services
- reduced – 5% Domestic fuel and power, some energy saving materials and children’s car seats
- zero – 0% Books and newspapers, public transport, children’s clothes and shoes, some food items
If you are a VAT registered business you must report the amount of VAT you have charged and the amount you have paid to HMRC normally every 3 months by way of a VAT return.
If you have charged more than you have paid you will need to pay the difference to HMRC.
You must submit your VAT return online within one month and seven days of the end of the accounting period, for example a quarter ended 31 December would need to be submitted and paid on or before 7 February. You have to pay your bill electronically as most businesses are not allowed to pay by cheque.
VAT Annual Accounting Scheme
With the annual accounting scheme, you only need to submit one return a year. Payments on account are based on your previous return. When you submit your return you either make a balancing payment or request a refund.
This scheme is not suitable for your business if you regularly reclaim VAT because you can only get 1 refund a year.
You can join this scheme if your estimated turnover is £1.35 million or below.
Cash Accounting Scheme
Normally you pay VAT on your sales regardless of whether your customer has paid you or not. Using the cash accounting scheme you do not have to paid your VAT until your customer has paid you.
The major benefit of the cash accounting scheme is the affect it has on cash flow, particularly if you have major customers who are slow payers.
The downsides are that if you regularly reclaim more VAT than you pay or if the majority of your purchases are on credit terms, you will have to wait longer to claim it back.
You may use the cash accounting scheme if your estimated turnover is £1.35 million or below and you can remain in the scheme until your turnover exceeds £1.6 million.
Flat Rate Scheme
The flat rate scheme has been made available to businesses to reduce the amount of administrative burden required to process returns. Under the flat rat scheme you normally apply a single percentage to your total flat rate turnover and pay the VAT calculated.
On the flat rate scheme you do not normally record and reclaim VAT on purchases, however you can make a claim for capital purchases over £2,000.
To join the scheme your estimated turnover should be below £150,000 and you can remain in the scheme until you turnover exceeds £230,000.
The flat rate scheme may not be right for your business if you make a lot of zero rated or exempt sales or if most of your purchases are standard rated.
Please see below the current flat rate percentages
|Category of business||Appropriate percentage|
|Accountancy or book-keeping||14.5|
|Any other activity not listed elsewhere||12|
|Architect, civil and structural engineer or surveyor||14.5|
|Boarding or care of animals||12|
|Business services that are not listed elsewhere||12|
|Catering services including restaurants and takeaways||12.5|
|Computer and IT consultancy or data processing||14.5|
|Computer repair services||10.5|
|Dealing in waste or scrap||10.5|
|Entertainment or journalism||12.5|
|Estate agency or property management services||12|
|Farming or agriculture that is not listed elsewhere||6.5|
|Film, radio, television or video production||13|
|Forestry or fishing||10.5|
|General building or construction services*||9.5|
|Hairdressing or other beauty treatment services||13|
|Hiring or renting goods||9.5|
|Hotel or accommodation||10.5|
|Investigation or security||12|
|Labour-only building or construction services*||14.5|
|Laundry or dry-cleaning services||12|
|Lawyer or legal services||14.5|
|Library, archive, museum or other cultural activity||9.5|
|Manufacturing fabricated metal products||10.5|
|Manufacturing that is not listed elsewhere||9.5|
|Manufacturing yarn, textiles or clothing||9|
|Mining or quarrying||10|
|Real estate activity not listed elsewhere||14|
|Repairing personal or household goods||10|
|Retailing food, confectionary, tobacco, newspapers or children’s clothing||4|
|Retailing pharmaceuticals, medical goods, cosmetics or toiletries||8|
|Retailing that is not listed elsewhere||7.5|
|Retailing vehicles or fuel||6.5|
|Sport or recreation||8.5|
|Transport or storage, including couriers, freight, removals and taxis||10|
|Wholesaling agricultural products||8|
|Wholesaling that is not listed elsewhere||8.5|