What is VAT?
VAT is the following:
A general tax that applies to all commercial activities involving the production and distribution of goods and the provision of services. If the annual turnover of the business is less than the £83,000 threshold, the business does not have to charge VAT on their sales.
Charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain.
How VAT works
VAT is charged on things like:
Hiring or loaning goods to someone
Selling business assets
Items sold to staff
Business goods used for personal reasons
Together, these are known as taxable supplies.
VAT-registered businesses must charge VAT on their goods or services, and they may reclaim any VAT they have paid on business-related goods or services.
If you are a VAT-registered business, you must report to HMRC the amount of VAT you have charged and the amount you have paid. This is done through a VAT return, which is due every three months.
You MUST account for VAT on the full value of what you sell, even if you:
Receive goods or services instead of money (for example, if you take something in part exchange)
Haven’t charged any VAT to the customer, whatever price you charge is treated as including VAT
If you have charged more VAT than you have paid, you will have to pay the difference to HMRC. If you have paid more VAT than you have charged, you can reclaim the difference.
Contact The VAT People
The VAT experts at The VAT People are able to offer bespoke support for businesses of all types. Contact us today by calling 0161 477 6600, or fill out an online enquiry form and we will be in touch.
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