VAT can be a confusing area of taxation, however misunderstanding the regulations can potentially leave your business open to hefty fines from HMRC.
We’ve collected the top five things every business needs to know about VAT to help you avoid unnecessary fines, and keep you on the right track.
- What is VAT?
VAT or Value Added Tax, is a tax levied on the sale of goods or services. VAT is currently set at a rate of 20%. It is collected by companies for HMRC and the total is usually the amount of VAT collected, minus what a company has paid.
- What’s liable for VAT?
HMRC lists hiring or loaning goods, business assets, commission, goods sold to staff, business goods used for personal reasons and ‘non-sales’ such as bartering, gifts and part-exchange, as all liable for VAT.
- When can you charge VAT?
The current threshold set by HMRC is a turnover of more than £85,000. If your business’s turnover is under the VAT threshold, you can still register for VAT but you should only do so if your business will benefit, for example if you sell to businesses who charge VAT.
- Do I have to charge VAT?
Once you have registered your business for VAT you must charge VAT on all goods and services you sell. You may also be liable for VAT when you sell business assets and commission.
- When do I need to send a VAT return?
If you are a VAT registered business you must send a VAT return to HMRC every three months. If you have charged more VAT than you have paid you will have to pay the difference, but if you have overpaid you will be able to reclaim the excess from HMRC.
If you’re worried about VAT and you’re looking for help, The Bailey Group can guide you through the process, from registering to sending VAT returns.
Find out how we can help you with VAT here.