Accountancy Services Direct’s Business Owners Inside Guide To VAT
Many of the questions our clients ask us at Accountancy Services Direct relates to Value Added Tax. Value Added Tax (VAT) is the most common form of tax as it is charged on most goods and services provided by UK VAT registered businesses. 
It is also charged on goods and some services (even accountancy services!) which are imported from countries outside of the European Union (EU) and brought in to the UK from other EU countries.
VAT is charged when a VAT registered business sells their goods or services to another business or non-business individual.
When VAT registered businesses purchase goods or services then they are generally able to reclaim the VAT they have paid from HM Revenue and Customs.
VAT registered businesses must add VAT to their sales figure if:
- Their turnover in the previous 12 months has gone over a specified limit (currently £68,000);
- They think their turnover will soon exceed this limit;
- They have voluntarily registered for the scheme which any business can do if they think it is going to be a benefit to them.
There are three rates of VAT depending on the type of goods or services which the business provides, they are:
- Standard – 15% (to become 17.5% from 1 January 2010): This rate is charged on most goods and services unless specifically defined as reduced or zero;
- Reduced – 5%: Examples are domestic fuel and power, the installing of energy saving materials, sanitary hygiene products and children’s car seats among others;
- Zero – 0%: Examples are food (not restaurant meals or hot take aways), books and newspapers, children’s clothes/shoes and public transport among others.
Some goods or services can also be defined as:
- Exempt from VAT – These can be insurance, credit provision and members subs for example;
- Outside of UK VAT system – For example non-business activities (selling some of a personal collection), fees which are fixed by law (statutory fees) like MOT’s or the congestion charge.
There are many more issues surrounding VAT including how to administer it, how to complete and submit your VAT form, how to register and what scheme you should be registering for (Cash Accounting, Annual Accounting or Flat Rate Scheme).
These points will be discussed in detail in later help sheets that we at Accountancy Services Direct will be producing.
Should you wish to discuss your VAT requirements then please get in touch with us at Accountancy Services Direct, we are always happy to help.
'Don't increase tax on small firms', FSB says
« First Video In the Accountancy Services Direct’s One Minute Accounting Serises ‘The Accounting Equation’ | Home | Business Owners Profit & Loss Account Quick Video Tutorial »
Leave a Comment