Value Added Tax, or VAT, can be defined as a tax that is applied to goods and services in the UK. Thus, it is imperative for a business owner to know the functionality of VAT, how it works, and the way one has to comply with the regulations. On this page, let us discuss a few facts and points in regards to VAT and related issues in the UK. We also discuss registration, rates, and other points related to VAT.

Who in the UK needs to register for VAT? 

As value-added tax (VAT) is levied by the UK government on products and services to raise money for public expenditure, it is imposed on the goods and services at every step of production or delivery. In other words, VAT can be defined as a tax that is applied to the use or consumption of goods by the end customer and is therefore paid by the end customer.

 Businesses in the UK charge VAT on every product and service they sell. Thereafter, they would claim the VAT that they had paid on their own purchases. The amount of VAT that is paid at each stage of manufacturing or distribution is then passed on to the next purchase until the product ultimately reaches the end consumer. So the VAT is essentially a tax on the end consumer.

When is registration for VAT needed?

As for the UK laws, a business has to register for VAT with the HMRC (HM Revenue and Customs) if its annual turnover exceeds the present threshold of £85,000. However, a business can choose voluntarily to register in case the annual has not reached that threshold. Once the registration is done, the business has to apply VAT to its sales and pay VAT on its purchases. Besides, it is also supposed to file regular VAT returns with HMRC. Thus, businesses are advised to talk to the VAT return experts for further guidance and assistance in regards to VAT.

What are the different VAT rates and times for charging VAT? 

In the UK, there are three main rates of value-added tax (VAT) that apply to goods and services. Besides, there are a number of VAT exemptions and reduced rates.

Standard Rates: The standard rate of VAT in the UK is 20%.

Reduced Rate: The reduced rate is 5%, which is levied on domestic fuel, mobility aids, sanitary products, certain domestic repairs, and energy-saving materials like insulation.

Zero Rate: The 0% VAT is levied on food and drink, newspapers and books, kids garments, certain medical supplies, and certain supplies that are directly or indirectly related to international travel.

A business can still claim the tax they paid on their own purchases if it is registered for VAT and sells products or services that are subject to the zero rate of VAT. This allows them to reduce their overall VAT burden by offsetting the VAT they have paid against the one they have been charged with.

The businesses have to talk to the experts for VAT returns in Reading to know more.

 As there are certain goods and services that are less expensive than others, the zero rate of VAT may have an effect on consumer behaviour.

For further queries, you need to talk to Biz Accounting Solutions Ltd. Call us to book our service and see how we can help you with VAT.