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Frequently Asked VAT Questions

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Navigating the VAT terrain can be a significant hurdle for start-ups and SMEs. We comprehend the difficulty it poses and work with businesses like yours regularly, including many first-time owners who need to grasp the ins and outs of VAT as their endeavours expand.

Our knowledgeable advisors are on hand to take the burden out of managing your tax affairs. We offer bookkeeping and accounting services from qualified experts and handle all business tax forms – including income tax and National Insurance Contributions (NICs). 

We ensure you have the right guidance at every step, so whether you already employ an accountant or need support with preparing your returns, our dedicated teams will tailor their services specifically to suit your needs. This way, we reduce financial complications and make sure that nothing slips through any cracks!

Everything you need to know about vat

VAT, or value-added tax, is a form of consumption tax applied to goods and services people generally buy and sell. VAT would have been applied already on most everyday purchases; thus, consumers need not worry about them. For businesses, it is important to learn that they learn how to charge VAT to consumers correctly. 

VAT is imposed in the UK at a rate of 20%. Essentially, this entails adding 20% of the base price as an extra charge managed by Her Majesty’s Revenue and Customs (HMRC). If your business is registered for VAT purposes, applying this tax on all your offerings is mandatory while maintaining comprehensive records for submission in your Return. Further details will be elaborated on later.

Businesses also pay VAT on specific services and inventory they acquire to conduct their operations. However, they can recover Input Tax incurred from such purchases in certain situations. The recovery of Input Tax depends on maintaining accurate records of business transactions. Keeping copies of all invoices for goods bought or sold is part of these records required for the proper reclaiming process.

Frequently asked questions on VAT

  • What is VAT?

VAT stands for Value Added Tax and it is the tax that is imposed on the sales of goods and services across the European Union and other countries, across the world.

  • What are the items that are subject to VAT?

In the UK, most of the items are subject to VAT. This is generally included in the price people pay for the goods they purchase from the shops. Most businesses that people deal with will include VAT when they give a quote on their invoice.

  • Is VAT applicable on Stationery?

Most people want to know how much VAT they pay for the business. The VAT that people pay on items depends on how they are categorized. Most items that incur VAT fall under the standard rate category of 20%. Office supplies and Stationery will fall under this category.

  • Is VAT applicable on train tickets?

Some transportation means are VAT exempt or have zero VAT rates, and one classic example is train tickets. Bus fares, air travel tickets, vehicle insurance, and congestion charges are VAT exempt. But taxi fares, and fuel, parking charges are all levied with taxes.

  • What is the standard rate of VAT in the UK?

The standard rate of VAT is 20% in the UK, which applies to most of the goods and services in the country. For businesses, Stationery, supplies and most other items that are used daily will be covered under this 20% threshold. Some goods and services, however, will be levied a reduced rate of VAT at 5%. This includes energy-saving means, sanitary products, and domestic gas and electricity. Some goods, however, have zero percentage VAT. These products are not charged taxes for their sale. Such products include food, books, children’s clothes, newspaper, etc. Tax-exempt goods, or goods for which the government doesn’t levy taxes, are postage stamps, property transactions, and financial transactions. 

  • What does plus VAT mean?

When a buyer pays for something with their invoice or gets a quote, they will see the price plus VAT in the price list. This means that the VAT is yet to be added to the final total price of the product. However, this has to be considered while paying for particular goods or services. 

  • Should a business be VAT registered to levy taxes on its products?

If a business is not registered for VAT, then there is no need for it to worry about value-added taxes. Nevertheless, if the business is registered for VAT, it will charge VAT on its products and services. Additionally, being a VAT-registered company provides advantages since they reclaim the amount of paid VAT on goods and services purchased for business purposes.

  • When should a business register itself with VAT?

As of November 2021, the VAT registration benchmark is £85,000. If the business turnover is anticipated to reach this figure within a month or your VAT taxable turnover exceeded this limit in the past year, it must sign up with HMRC for VAT. The issuance of a unique VAT number will be provided upon successful registration.

  • How to calculate VAT using a VAT calculator?

Since 4th January 2011, the standard VAT rate has remained at a steady 20%. For businesses, paying more taxes is always unwelcome; this particular percentage simplifies VAT calculations greatly. If one only knows the total payment received for goods or services rendered and is unsure how much VAT has been charged, one can use the VAT calculator. It helps accurately determine how much should be added or claimed back.

Bottom Line

VAT-registered businesses have to complete their VAT returns on time. Businesses carry a lot of benefits by getting VAT registered, such as being able to claim the VAT back. In 2019, the government came up with an initiative called Making tax digital to make it easier for businesses and individuals to deal with VAT. This initiative demands that VAT-registered businesses with a turnover of 85,000 pounds keep the tax records and submit them to the HMRC digitally. 

For more information on how eAccounts can help you with your VAT. Please contact us on 02921 056209 alternatively email admin@e-accounts.co.uk

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