VAT

If you run a business you'll need to know about VAT rates and registration thresholds.

A VAT registered business charges VAT when selling goods or services and in turn they can generally reclaim the VAT they have paid on any goods and services purchased.

There are three rates of VAT, depending on the goods or services the business provides. The current 2014 rates are; standard @ 20%, reduced @5% and zero @0%. There are also some goods and services that are exempt from VAT or outside the UK VAT system altogether.

Find out what's exempt from VAT or outside the scope, and what rate of VAT is charged on sales by visiting http://www.hmrc.gov.uk/vat/forms-rates/rates/index.htm

In addition to sales, a VAT registered business must account for and pay VAT on 

In addition to charging VAT on the goods and services that you supply to your customers, you must account for and pay VAT on:

  • items sold to staff, such as canteen meals or via vending machines
  • sales of business assets
  • hiring or loaning of goods to someone else
  • commission received from selling something on behalf of someone else
  • certain business gifts
  • goods that you or your staff take out of the business for personal use, whether on a temporary or permanent basis
  • services supplied to the business but then used privately
  • VAT is also chargeable on:
  • barter
  • part-exchange
  • gifts
Full details can be found on HMRC's Goods and Services where you have to pay VAT page.|

If you're in business, you must register for VAT if your VAT taxable turnover for the previous 12 months is more than £81,000. This figure is known as the VAT registration threshold. The deregistration threshold is £79,000. The threshold changes - usually once a year announced in the Budget - so you should regularly check your turnover against the current threshold. Check Current VAT Registration Threshold|

 

A VAT taxable turnover is the total of sales and certain other supplies that are subject to VAT, including supplies that are zero-rated. If goods or services sales are exempt from VAT they're not subject to VAT and so they're not part of VAT taxable turnover.

There are some VAT schemes that businesses may be able to take advantage of to reduce paperwork and save time. A business can only use some of these schemes if VAT taxable turnover is below a certain threshold. See VAT scheme basics|

HMRC The VAT Guide| - This guide explains the basics of how VAT works. It also tells you where you can find more information and advice. A VAT awareness WEBINAR| is also available, explaining what VAT is and how it works, when you need or can choose to register and what you must do once you're registered.