Should your business be charging VAT?

We often get asked by business owners if they should or shouldn’t add VAT to the prices of their products. Without putting much thought into it, many of them assume that if they pay VAT to their suppliers, they should be charging VAT on what they sell as well. Doing so, without being VAT registered, is treated as VAT fraud and can get the company into a lot of trouble.

What is VAT fraud?

VAT fraud is a type of tax evasion. It happens when a business doesn’t charge VAT when they should, or charges VAT but doesn’t pay it to the HMRC.

What is VAT and when should I register?

VAT is a value-added tax, known in some countries as a goods and services tax. You don’t have to register for VAT until your turnover reaches a certain limit in any 12 months, but be sure to understand this is a rolling 12 months meaning that each month you add up, and include the previous 11 months hence, rolling ! This limit, also known as the “VAT threshold” is currently £85,000 in the UK. However, you can also register voluntarily even if your turnover is below the statutory registration threshold if you wish to recover VAT that you might pay out.

By all means, you should avoid delaying if you do need to register because you will be faced with penalties and interest charges. Being late could also result in having to account and pay over the VAT due from the time that you should have been registered; of course if it is for your own advantage that you wish to register then you have a deadline for backdating.

Unfortunately, if it’s too late you may not be able to recover the outstanding VAT from your customers. If you do find yourself in this situation please contact us for assistance. The longer you delay this process, the higher the penalties will be.

What are the benefits of being VAT registered?

VAT registration can add cash flow to your business and be advantageous if:
– the nature of your trade means that your costs or purchases include VAT;
– most of your customers are VAT registered and can claim back the VAT that you have added to your sales;
– your supplies are mainly zero-rated for VAT purposes.

However, be sure to understand that the VAT is not your businesses money, it belongs to the Revenue!

What do I have to do when my business is VAT registered?

Being VAT registered means that you’ll need to fill in a VAT return form every quarter in order to show to HMRC how much VAT you are due to pay. The VAT return amount is the amount of VAT reclaimable on purchases you have made.

You can however in some circumstances cap the level of VAT that you pay, ask us about this.

If you feel like you need help, our professionals can complete your VAT registration or return forms in a timely manner and offer an affordable service suited to your accounting needs. Contact us for a free consultation by calling 07773 283 323.


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