VAT Guide

Value Added Tax (VAT)

In the UK Value Added Tax (more simply known as VAT) is administered by H.M. Revenue & Customs. 

When do I have to register for VAT?

Your business must register for VAT if your turnover exceeds £85,000. It is not necessary to register a Company for VAT if its turnover is less than £85,000.

Voluntary Registration

We recommend, however, that registration takes place regardless, as this enables you to recover any VAT that you incur on things that you buy for the business (e.g. computer equipment/accountancy fees). There is no downside for you, as we will complete the quarterly VAT returns for you. 

Registering for VAT

VAT registration usually takes about 8 weeks, but this will not prevent you from invoicing your customers or reclaiming VAT on expenses. Until the Company is registered you simply raise sales invoices without adding on VAT. 

HMRC will send you a VAT certificate and also confirm your registration date and date of your first VAT submission.

Once the Company is VAT registered you must show the registration number on your invoices and add VAT at the appropriate rate (currently 20%). 

Different VAT schemes exist

Below is brief summary of some of the VAT schemes available.

Standard Scheme

Invoiced based (VAT is recorded and paid when invoices are issued) or Cash accounting scheme (VAT is recorded when cash is received or paid), please speak to us we will advise which scheme is suitable for your business.

Flat Rate Scheme

There is also the option to register for the VAT Flat Rate Scheme; a set % is paid to HMRC.  Ask us for more information about this, as sometimes, going on this scheme is not beneficial. 

Annual Accounting Scheme

Under this scheme you submit one return a year, but you pay your VAT liability monthly or quarterly based on last VAT return. To join this scheme the business turnover must be below £1.35m.

Your Responsibilities

You will receive electronic communication from HMRC on a quarterly basis which should be forwarded to us as soon as you receive it, or if you have decided to have our office as your accountant, this will be taken care of already. 

VAT payable must be paid by the last day of the month following the VAT quarter.  There are penalties for late payment.

In order to recover VAT on things that you buy for the business you must obtain a “VAT Invoice” showing the supplier’s VAT No. Always ask for a VAT invoice as they will not automatically be provided every time.

What can I claim VAT on? 

Once the Company is VAT registered, it is able to claim back any VAT incurred on business expenses, although not all expenses have VAT charged on them. 

Expenses on which you can usually claim VAT:‐  

• Computer equipment and software 

• Stationery 

• Accountancy fees

• Legal fees 

• Telephone

• Petrol and motor repairs (if claiming a mileage allowance the VAT element is 1p per mile) 

• 50% of the VAT paid on either the car lease rental payments or car contract hire payments. 

Expenses on which you cannot usually claim VAT:‐  

• Postage

• Technical books and journals 

• The purchase of a car by the company

• Road tax and insurance for a company owned vehicle

• Public transport costs 

• Payments to the Registrar of Companies 

• Payments of Directors’ remuneration.

For ease of accounting, it is good to have your VAT returns quarter in line with your accounting year end.

Not always obvious! If you are in any doubt about how to deal with a particular transaction you should seek advice from the VAT helpline or your accountant.

Get in touch for help on VAT – Simply call us or enquire by email and we will be happy to help you.