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Value Added Tax

If your business turnover (sales) have reached a level that exceeds the mandatory Value Added Tax (VAT) threshold then you must register for VAT. Once registered you have to charge VAT at the standard 20% rate on all standard rated sales, this then has to be paid over to HMRC after deducting any VAT incurred on expenses on a quarterly basis.

If you do not register for VAT by the due date then you will become liable to penalties and interest charges as well as having to account for and pay and VAT that should have been payable from the time you should have registered, some of which may not be recoverable from your customers.

There are many special schemes that are designed to simplify the administrative burden and cash flow problems that VAT may cause a small business:

Cash Accounting

Under the usual method for accounting for VAT you may be required to pay over VAT charged to customer for which you have not been paid. The cash accounting scheme is available to businesses whose turnover is within the limits of the scheme and allows a business to pay VAT over to HMRC only when payment has been received.

Flat Rate Scheme

Businesses that are eligible to join this scheme can simplify the VAT calculations by simply applying a flat rate percentage to their gross sales. The flat rate percentage will be determined by the rate table issued by HMRC and is specific to your industry.

Annual Accounting

Generally a business is required to submit a quarterly VAT Return and pay the liability on a quarterly basis. The annual accounting scheme simplifies this process by the business agreeing an annual liability and pays this over via monthly installments. At the end of the year an annual VAT Return is submitted and any balancing liability is paid or overpayment repaid.

Retailers Scheme

When operating the standard VAT system a business is required to keep a record of every transaction. For some businesses this may be an unrealistic burden. To soften the administrative burden, affected businesses can use one of the schemes set up with retailers in mind.

We offer a VAT service where all you have to do is arrange a time to drop off your accounting records for the VAT period in question and we will prepare and electronically submit your VAT Return for you.