Every business with an annual turnover of £82,000 (2015/16 threshold) or more must register for VAT. That means completing the quarterly (or sometimes monthly) forms sent to you by HM Revenue & Customs and paying your VAT liability within one month.

The VAT system is policed by HMRC with heavy penalties for breaches of the legislation. Ignorance is not an acceptable excuse for not complying with the rules. It is however important for you to seek specific professional advice appropriate to your circumstances.

A transaction is within the scope of VAT if:

  • there is a supply of goods or services
  • made in the UK
  • by a taxable person
  • in the course or furtherance of business.

Inputs and outputs

Businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs. Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.

The output VAT is being collected from the customer by the business on behalf of HMRC and must be regularly paid over to them.

However the input VAT suffered on the goods and services purchased can be deducted from the amount of output tax owed. Please note that certain categories of input tax can never be reclaimed, such as that in respect of third party UK business entertainment and for most business cars.

How we can help

Ensuring that you comply with all the VAT regulations is essential. We can assist you in a number of ways including:

  • tailoring your accounting systems to bring together the VAT information accurately and quickly
  • ensuring that your business is VAT efficient and that adequate finance is available to meet your VAT liability on time
  • providing assistance with the completion of VAT returns
  • negotiating with HMRC if disagreements arise and in reaching settlements
  • advising as to whether any of the available schemes may be appropriate for you.

If you are starting, or have recently started a business and you would like to discuss any of the points mentioned in this VAT summary please contact us.