VAT (Value Added Tax) is a tax added to most products and services sold by VAT-registered businesses.
Businesses must register for VAT if their VAT taxable turnover is more than £85,000. They can also choose to register if their turnover is less than £85,000.
Your responsibilities as a VAT-registered business
As a VAT-registered business you must:
- include VAT in the price of all goods and services at the correct rate
- keep records of how much VAT you pay for things you buy for your business
- account for VAT on any goods you import into the UK
- report the amount of VAT you charged your customers and the amount of VAT you paid to other businesses by sending a VAT return to HM Revenue and Customs (HMRC) – usually every 3 months
- pay any VAT you owe to HMRC
The VAT you pay is usually the difference between any VAT you’ve paid to other businesses, and the VAT you’ve charged your customers.
If you’ve charged more VAT than you’ve paid, you must pay the difference to HMRC.
If you’ve paid more VAT than you’ve charged, HMRC will usually repay you the difference.
You can appoint an agent to deal with HMRC on your behalf if you prefer. You may contact Capital Round and enjoy peace of mind so contact them at 00447458931755
VAT RATES FOR GOODS AND SERVICES
% of VAT
What the rate applies to
Most goods and services
Some goods and services, i.e children’s car seats and home energy
Zero-rated goods and services, eg most food and children’s clothes
The standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%).
Some things are exempt from VAT, such as postage stamps, financial and property transactions.
The VAT rate businesses charge depends on their goods and services.
KEEPING VAT RECORDS
HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.
Records you must keep
You must keep a record of the following:
- everything you buy and sell (including zero-rated, reduced and VAT exempt items)
- copies of all invoices you issue
- all invoices you receive (originals or electronic copies)
- self-billing agreements (where the customer prepares the invoice)
- the name, address, and VAT number of any self-billing suppliers
- debit or credit notes
- any goods you give away or take from stock for your private use
Keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.
RECORDS YOU MUST KEEP DIGITALLY
You must keep some VAT records digitally – unless you’re exempt from following Making Tax Digital for VAT rules.
Keep digital records of the following:
- the VAT on goods and services you supply (supplies made)
- the VAT on goods and services you receive (supplies received)
- the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell
- any adjustments you make to a return
- reverse charge transactions – where you record the VAT on both the sale price and the purchase price of goods and services you buy
- any VAT accounting schemes you use
- your total daily gross takings if you use a retail scheme
- items you can reclaim VAT on if you use the Flat Rate Scheme
- your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme
Keep digital copies of documents that cover multiple transactions made on behalf of your business by:
- volunteers for charity fundraising
- a third-party business
- employees for expenses in petty cash