Value Added Tax
What is VAT:
VAT is acronym for Value Added Tax applied on purchase rate of taxable supplies and services.
Value added tax (VAT) is a type of indirect tax levied on goods and services for value added at every point of production or distribution cycle, starting from raw materials, and going all the way to the final retail purchase.
Why we pay VAT:
The main aim behind the introduction of VAT was to eliminate the presence of double taxation and the cascading effect from the then existing sales tax structure.
Why Knowing about VAT is important?
We have only covered a brief overview of VAT basic rules. You might need an expert who can provide you VAT Advice Services, VAT tax returns, payments, and penalties.
The rules for VAT are extremely complex and a business should establish the clauses applicable to them, this is to ensure they pay the correct VAT. This would also result in ensuring that businesses claim all the relevant reliefs available. This is worth mentioning that there are higher penalties for not complying to Value Added Tax Act 1994.
What are the current Rates of VAT:
There are 3 different rates for VAT depending upon the nature of goods and services:
- Standard rate: 20% applies to most goods and services
- Reduced rate: 5% applies to good and services like home energy, domestic fuel, children’s car seats, residential property conversions, mobility aids for older people
- Zero rate: The goods and services under zero rate pay no VAT but are still under VAT regulation. Most foods, books and newspapers, children’s clothing, export from Northern Ireland to outside the EU and the UK get a 0% charge.
Some goods and services are exempt from VAT which means one does not need to pay VAT on these.
The following are some of the items falling in the exemption list:
- Insurance, finance, and credit
- education and training services
- fundraising events by charities
- subscriptions to membership organizations
Partly exempt business:
There is another category which partially exempts businesses from VAT.
A business is partly exempt if they incur VAT on purchases that relate to exempt supplies.
We offer accounting services to small businesses in Ilford.
Current threshold to register for VAT:
If your taxable goods or services’ turnover exceed from £85,000 then you must register for VAT. The taxable turnover is the turnover generated from sales that are not exempt from VAT, even the goods or services with zero VAT rate is also considered in taxable turnover.
|Registered late by||Penalty|
|not more than 9 months late||5%|
|more than 9 months but not more than 18 months late||10%|
|more than 18 months late.||15%|
There is a minimum penalty of £50.
Filing VAT return and paying:
Normally you must file your Vat return and pay your VAT at the end of each quarter, however HMRC may ask to file VAT return and pay for each month.
There is a penalty regime for late filing and payment of VAT.
We are tax accountants in East London that provides professional advice for tax filing.
Place of supply for services:
It is extremely important to consider about the place of supply because VAT is charged from the place of the supply.
VAT after Brexit:
The situation of VAT treatment has changed after Brexit and this has become more complex issue now.
VAT on good to/ from Northern Ireland:
There are sperate set of rules for good supplied from Northern Ireland and vice Vera after Brexit.
We provide VAT advice services as part of our Tax Planning service to various types of businesses for example, online trader, Consultants, retailers, manufacturing businesses. Our regular support ensures businesses don’t fall into HMRC investigation.
However, if your business is under HMRC investigation, we could help to reduce your stress.
We are here to help!
Please feel free to contact us for a no obligation consultation.