Vat accountants 

What is VAT?

Value Added Tax, also known as VAT, is a tax charged on most products and services sold in the UK. Because VAT is a consumption tax paid by the end customer, businesses must first collect the tax from customers at the time of a sale and then send it to HM Revenue and Customs (HMRC).

In the UK, all businesses must register for VAT if their annual taxable earnings exceed a certain threshold, which is now £85,000. Once registered, they must charge VAT on taxable supplies and file regular VAT returns to HMRC.

When is the best time for a small business to hire an accountant?

The ideal time for a small business to hire an accountant is usually before setting up the company. This way, you can remain assured that you have the proper legal structure and that your personal and company taxes are optimised.

As a business grows, financial tasks become more time-consuming and complicated, making it increasingly necessary to have organised and accurate financial records. An accountant can help manage these tasks and ensure that the company complies with legal standards.

What is the VAT rate?

In the UK, generally, the VAT rates depend upon the goods sold or services provided and the location of the buyer. These rates are listed in the table below, along with the general categories to which they apply.

How can an accountant help you with VAT registration and returns in the UK?

An accountant can assist you in registering for VAT with HMRC if your business meets the registration threshold, typically £85,000 of taxable turnover in the previous 12 months.

You can voluntarily register for VAT even if your taxable turnover is less than £85,000.

An accountant can prepare and submit your VAT returns, ensuring that you comply with all VAT laws and regulations and are eligible for applicable VAT reliefs or exemptions. They will assist you in avoiding late fees or interest charges.

How does a VAT accountant help businesses in VAT compliance and planning?

An accountant can ensure that your business complies fully with all VAT rules and regulations and can offer guidance on more complicated aspects of VAT, such as how to approach cross-border transactions, how to charge VAT on digital services, and how trading with EU nations can impact VAT.

An accountant can assist you in planning for VAT, for instance, by advising you on the VAT implications of a financial decision or transaction or by assisting you in structuring your business in a tax-effective manner.

Can businesses manage their VAT without a VAT accountant?

Yes, companies can handle their VAT without a VAT accountant, but it can be complicated and time-consuming. Businesses can ensure compliance with VAT laws and find opportunities to enhance their VAT strategy by working with a VAT accountant.

What is the VAT threshold in the UK?

If your taxable revenue reaches £85,000, you must register for VAT.

Taxable turnover refers to all earnings received by sales that are not VAT-exempt. Even earnings on which the VAT rate is zero are referred to as taxable turnover.

Businesses that fall below this threshold are exempt from adding VAT to the sale of their products or services. Also, they are exempt from registering with HM Revenue & Customs (HMRC).

The turnover threshold is not measured in a fixed period like the tax year but rather in a rolling 12-month period.It can start at any time, such as from the beginning of June to the end of May.

Businesses that are not registered but whose annual revenue is near the registration threshold should be aware of this. After you have passed the turnover threshold, there are strict deadlines for filing the registration and charging VAT.

How to register for VAT?

VAT applies to businesses, sole traders and partnerships. Use VAT1 form to submit the VAT registration application to the HMRC. You can do this online or by post. Once registered successfully, HMRC will provide a VAT registration certificate mentioning your VAT number, registration's start date, and when the first VAT return is due.

Keep in mind that even businesses with income below the threshold can choose to register for VAT. This is referred to as voluntary registration. Benefits of voluntarily registering for VAT include building a more trustworthy image for your consumers and reclaiming VAT on purchases.

I'm a sole trader. Do I still have to pay VAT?

The same rules apply to limited companies, partnerships, freelancers and sole proprietors: You must register for VAT if you exceed the annual turnover threshold or expect it to do so in the coming month.

You must start keeping records and adding VAT to your client invoices from the registration day. Your company will be VAT registered in your name, as compared to limited companies registered in the business's name.

How do I charge VAT?

After determining the VAT rate that applies to your products or services, which is often 20%, and after successfully registering, you must add that 20% on a different line on your receipt or invoice to every consumer. Additionally, include your VAT registration number. However, you can do so more subtly at the bottom of the page in smaller font sizes.

What is my VAT number?

A VAT Number is a special code given to a business registered for VAT. This is often referred to as a VAT Registration Number. A VAT number is nine digits long and typically starts with GB. Companies receive a VAT registration certificate from HMRC that includes their VAT number.

While submitting VAT returns, it is crucial to verify your VAT number. Errors in your VAT return may result in delays, and HMRC can reject your tax input claim.

What can I reclaim VAT on?

Businesses can claim VAT on products or services explicitly needed for their operations. Claiming VAT back is possible for things such as:

• Raw materials, direct business costs
• Contractors' and consultants' fees
• Accountant and auditor's fees
• Business rent, office supplies and furniture
• Motor vehicles, accessories, fuel and maintenance for said vehicles
• Staff travel and mobile service plans used for company calls

A few things, such as the following, are not eligible for VAT reclaims:

• Anything that is purely for private use
• Business assets transferred to you
• Entertainment costs