...Value Added Tax...
VAT is charged on certain goods and services but not all. A VAT registered business must charge VAT on its supplies if its turnover exceeds the government limit, which is £64,000 per annum from 1st April 2007. A business must pay over VAT collected to HMRC on a quarterly basis after deducting any input VAT the business has paid.
Not all products or service are affected by VAT. Some of those who are exempt are insurance companies and certain medical providers. Some products may be chargeable to VAT at 17.5 % the standard rate, others may be at 5% or 0%. Because you are able to claim back VAT on certain purchases it is important to keep all VAT receipts. The difference between VAT charged and VAT claimed is paid or received from HMRC quarterly with a VAT return.
If turnover in the preceding 12 months exceeds the threshold then a business must register for VAT within 30 days. VAT must be charged from 1st of the month following month of registration. If turnover is likely to exceed the annual limit in the first month, then registration is immediate.
There are a number of schemes to help small businesses. Examples are as follows :-
- Cash accounting scheme. VAT is only payable to HMRC when payment is received. Input VAT may only be claimed when payment is actually made.
- Flat rate scheme. The VAT due is based on a percentage of turnover only. The percentage applicable depends on the type of business.
For further assistance with VAT please contact Mead Turner & Co. Ltd.