Before we get into the in depth discussion of VAT and related issues let us discuss what VAT is. Value Added Tax or VAT is the tax that a consumer or a buyer would need to pay for whatever service or product they purchase.
VAT is applicable to everyone – from a high street consumer to a business, from a street vendor to an online customer. VAT is considered an indirect tax in the UK and constitutes as part of the price that any product or service carries.
When is VAT Applicable?
VAT is applicable as and when the taxable turnover of a business exceeds the threshold of VAT registration. So the businesses that have VAT registration have to add VAT to the prices of its services or products. Thereafter, they remit the VAT to the HMRC following deduction of the VAT that they pay to the service providers and suppliers.
Therefore, as and when you run a business in the UK, you need to submit your VAT returns to the HMRC once every 3 months. Businesses generally prefer hiring accountants and Vat Return Experts, who are specialised in submitting VAT returns and related technicalities. To ensure the entire procedure of submitting the VAT return is as fast, seamless and flawless, professionals having years of experience and in-depth knowledge are generally selected. d
The amount of VAT that is chargeable in the UK
The rate of VAT charge in the UK depends on the nature of service or product that is provided. In the UK, the standard rate of VAT is 20%. However, for certain categories of products like domestic energy and child car seats, the rate is further increased by 5%. However, on essential commodities like food and garments, there are no VAT rates applicable.
Who is Entitled to Register for VAT?
Any business entity, whose taxable turnover exceeds the £85000 mark for a period of 12 months on a rolling basis is entitled to register for VAT. If a company so chooses, it may voluntarily register for VAT even if its taxable turnover is less than £85,000. It will assist the company in deducting the costs incurred in operating the registered business and other associated operations from the VAT that was paid.
What is the perfect time to register for VAT?
A business in the UK needs to have an eye on its turnover for a rolling 12-month period. This helps it to know precisely the exact date when it crosses that VAT registration threshold of £85,000. When it does so, the business needs to notify the HMRC within 30 days, starting from the end of the months in which they have crossed the threshold.
Upon doing so, the business will be registered by the first day of the next month. The best Vat return service provider will keep a strict vigil on the turnover of its client, and will make the move to notify HMRC as soon as the threshold is breached. This helps the businesses to save themselves from the trouble of keeping an eye on its turnover.