| Index »Value Added Tax (VAT) |
|
| Value Added Tax (VAT) |
|
| What Is VAT? |
|
| VAT is a tax that you pay when you buy goods and services in the European Union (EU), including the United Kingdom. Where VAT is payable it's normally included in the price of the goods or service you buy. Whether or not a self-employed person has to pay, Once you're registered as self-employed, you'll be a Self Assessment taxpayer. You'll have to fill in a tax return each year and give details of your earnings and any other income you get. This information is used to work out how much tax you have to pay.
|
| Your Tax Office will automatically send you a tax return every year in April. If you send your completed return back to your Tax Office by 30 September they'll work out your tax bill for you. You should send it back by the following 31 January at the latest. If it's late, you'll have to pay a penalty. |
| Instead of filling in your tax return by hand and posting it back, you could save time by filing it online. and in some cases has the right to choose to pay. Some goods don't attract VAT. Each EU country has its own rates of VAT. You have keep an eye on your annual turnover and make sure that you register for VAT as soon as you should. You will avoid penalties, interest and VAT that you may be unable to recover from your customers.VAT is a tax on consumer expenditure. It is collected on business transactions, imports and acquisitions. |
| Most business transactions involve supplies of goods or services. VAT is payable if they are: |
 |
Supplies made in the United Kingdom (UK) or the Isle of Man |
|
By a taxable person |
|
In the course of a business |
|
Are not specifically exempted or zero-rated. |
| When someone charges you VAT they multiply the original ('net') price of the item or service by the VAT rate to calculate the amount of VAT to
charge. They then add the VAT amount to the net price to give the 'gross' price - the price you pay. Most retail prices on bills and receipts include VAT - it is not shown separately. However some may have a line under which they show the VAT element. This doesn't mean you're being charged extra - it just shows how much of the price is made up of tax. |
| Non-retail invoices from VAT-registered suppliers (for example from builders or painters and decorators who are VAT registered) must show a separate amount for VAT. They must also show the 9-digit VAT registration number of the business. |
| Businesses with annual sales below £67,000 (2008-2009) don't have to register for (and therefore charge) VAT, but they may choose to do so voluntarily. If they don't, the price you pay for their goods or services may be cheaper than if you bought the same goods or services from a VAT-registered supplier. |
|
| Some Important Points |
|
|
VAT - Defer Registration If you are starting up a new business there may be a way to avoid vat registration for a period if the circumstances of your business are appropriate. This will especially benefit service trades to the general public with low vatable purchases. |
|
| |
|
Buying a business including VAT? If you are about to buy a business and the seller wants to charge VAT on the sale price, beware! You may not be able to recover the VAT charged. Please consult with us before you sign the contract! |
|
| |
|
Reclaim input VAT on invoices received after you de-register for VAT by completing form 427. Customs and Excise will allow a late claim. Don't forget to attach the relevant invoices. |
|
| |
|
Recover VAT on invoices that you have paid or received before you register for VAT by including the input VAT on your first return. Check with your local VAT office that will advise what you can claim. |
|
| |
|
Reclaim input VAT if your employees use a rate per mile to calculate the business use of their private car. Customs and Excise provide a chart which explains the claims procedures. |
|
| |
|
Keep a weather eye on your annual turnover and make sure that you register for VAT as soon as you should. You will avoid penalties, interest and VAT that you may be unable to recover from your customers. You can always call, we will be happy to clarify the registration rules as they apply to your case. |
|
| |
|
| Once You Are Registered For VAT : |
|
| As soon as your business is registered for VAT you must: |
|
Raise a VAT invoice whenever you make a standard-rated or reduced-rated supply to a VAT-registered customer |
|
| |
|
keep copies of all invoices you send or receive |
|
keep a note of all the VAT you have paid and charged |
|
keep a summary of VAT for each tax period covered by your VAT returns |
| You don't have to keep records in any set way, but they must be complete and up to date. They must also be easy for HM Revenue & Customs (HMRC) to inspect and the figures that you have used to fill in your VAT return must be easy to find. Usually your normal business records can be adapted quite easily to give this information. Records must be kept for a minimum of six years. |
| VAT invoices must be set out correctly, showing the rate and amount of VAT charged and the VAT number given to your business when you registered. You must also make sure that invoices from your VAT-registered suppliers show the same information so you can reclaim the VAT you pay. |
|
| Types Of VAT Rates |
|
| Standard Rate |
|
| You pay VAT on most goods and services in the UK at the standard rate, currently 17.5 per cent. |
|
| Reduced Rate |
|
| In some cases, for example childrens car seats and domestic fuel or power, you pay a reduced rate of five per cent. |
|
| Zero Rate |
|
| There are some goods on which you don't pay any VAT, like: |
|
Food |
|
Books, newspapers and magazines |
|
Children's clothes |
|
Special exempt items - for example equipment for disabled people |
|
| Food For Thought |
|
| Easy Way To Calculate The Standard Rate VAT:- |
|
| Value Added Tax - standard Rate is 17.5 % which can be split as |
| 10 % |
| 5% (Half of 10) |
| 2.5% (Half of 5) |
| 17.5% |
| |
| If the net price is £ 100, the vat element can be calculated by dividing this by 40 and multiplying it by 7 - which is £ 17.5. If you add the VAT element and the Net amount you get £ 117.50 as the Gross Amount. If you know the Gross Amount, you can get the vat element by deviding the Gross Amount by 47 and multiplying it by 7. |
|
| |
| |
