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Your business must register with HMRC for VAT if your total taxable turnover is over £85,000 per year.
If your business has a turnover of less than the VAT threshold, you can voluntarily opt to register for VAT as there are certain benefits for doing so.
Once you are registered, you are required to charge VAT on your sales at the appropriate rate, which is known as “output” VAT.
The VAT which you incur on your costs is known as “input” VAT.
At SRG Newmans, our tax team can ensure that your business pays the correct amount of VAT on time, every time. We can help you navigate the VAT maze and can provide advice on a range of VAT matters including:
Invoice or Cash Accounting
If your business turnover is less than the cash accounting threshold, then you have the choice of accounting for your VAT either based on when you invoice your customers or when your customers pay you.
VAT returns
The VAT period is usually quarterly although if it suits your business, you can opt to pay monthly. At the end of each VAT period, you must account for the output VAT you have charged to your customers and deduct the input VAT incurred on your costs from this. You must then pay the net balance to HMRC and file your VAT return with them.
Flat Rate Scheme
The Flat Rate Scheme (FRS) was introduced by the Government to reduce the administrative burden for small businesses. Instead of accounting for input and output VAT, you simply pay a set rate as a percentage of your turnover. This rate varies, depending on what type of business you run. To qualify, your turnover will need
Reverse charge VAT for the construction industry
Since 2021 businesses within the Construction Industry Scheme (CIS) must record, report and pay VAT under the new VAT domestic reverse charge rules. This rule affects both contractors and subcontractors and the supply of certain kinds of construction services in the UK and means any VAT-registered subcontractors who provide a service and any related goods to a VAT-registered contractor who is CIS-registered no longer need to account for the VAT.
Making Tax Digital for VAT
All VAT-registered businesses are now expected to submit their VAT quarterly to HMRC using approved digital software. Most MTD for VAT systems now utilise cloud technology and software such as Xero, QuickBooks or Sage. We can advise you on the most appropriate MTD-complaint software and can also prepare and file your digital VAT returns on your behalf for added peace of mind.