Baker Watkin chartered accountants and business advisers

Baker Watkin

Middlesex House

Rutherford Close

Stevenage SG1 2EF

t: 01438 750555

e: advisers@bakerwatkin.co.uk

An introduction to VAT

What are the rules for VAT registration?

VAT is a tax chargeable on taxable supplies made in the UK by taxable persons. A deduction is given for VAT paid to other businesses and the net balance is payable or reclaimable - normally on a quarterly basis.

A taxable person can be an Individual, Partnership, Limited Liability Partnership or a Limited Company, but they all must be carrying on a business. Some costs may have VAT charged but there are items of expenditure when the VAT may not be
reclaimed, eg business entertaining.

The VAT treatment of your outputs (sales) depends upon the type of supply. Some supplies are exempt or outside the scope of VAT. Other supplies are Vatable and charged at 0%,5% or 17.5% VAT.

Should I be registered for VAT?

You should notify HM Revenue & Customs when:

• Your vatable turnover for a twelve month period exceeds £64,000.
• You have reasonable grounds for believing that your turnover in the next 30 days will exceed £64,000 covering a rolling 12 month period.

In the first case, notification must be within thirty days of the end of the relevant month. In the latter case, notification must be within thirty days of the date on which grounds first existed. It is important to monitor turnover because there is a penalty for late registration which is in addition to the VAT payable.

Can I register if I don’t exceed the limits?

It is possible to register voluntarily provided you have a bona fide business.

How often willi have to complete a VAT return?

Every three months, a return is issued and must be submitted to HM Revenue & Customs no later than thirty days from the end of the three month period. Most VAT registered businesses work on this three month basis, but there are occasions when monthJy returns are required. It is important to make returns and payments on time as extensive legislation exists to levy penalties on defaulters.

We would be pleased to advise you what records you need to keep to complete the VAT return. There may also be suitable schemes offered by HM Revenue & Customs to make administering VAT easier.

Why not give us a try and book a free pre-engagement session - a no obligation way to find out what it's like to be one of our clients. Simply call James Abbott on 01438 750555 or email enquiries@bakerwatkin.co.uk.