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Value Added Tax (VAT)

What is VAT?

Value Added Tax or commonly known as VAT is a 20% tax on goods or services which is paid to HMRC. It is indirectly charged and collected by businesses and paid to HMRC through each stage of the goods or services sold. If you are VAT registered you can claim back all the VAT you have paid over a 12 month cycle.

Tax Advisory UK can help you with all your tax planning and tax investigations offering the best client service available in the industry.

Our goal is simple, to provide all our clients with tax-saving solutions by engaging you with highly regarded Chartered Tax Advisors (CTA) and respected Tax Investigators.

VAT threshold UK

If your business has a turnover of more than £85,000 it is mandatory to register VAT with HMRC. This means you will have to pay and charge 20% VAT on your products and services you supply to your customers. You can still choose to register if you do not have a turnover of £85,000.

You may be charged VAT by your suppliers and you may charge your customers VAT which you would have to declare in your yearly VAT returns to HMRC.

How much is VAT in UK?

VAT in the UK is currently 20% and this is the rate charged on most purchases. VAT rates on goods and services can vary so you need to check that you are charging the correct rates to your clients or customers.

There is a reduced VAT rate of 5% which is charged on children’s car seats, home energy and sanitary products.

The zero rate VAT is applied to most food, books, newspapers and children’s clothes. Even though there is no VAT charge you still have to report this on your yearly VAT returns.

There are some items that are exempt from VAT which do not have to be included in your VAT returns. These items or services can include

insurance, finance and credit
education and training
fundraising events by charities
subscriptions to membership organisations
selling, leasing and letting of commercial land and buildings – this exemption can be waived

How to charge VAT

VAT is collected by businesses on behalf of the government as an ‘indirect tax’. To charge VAT you have to add the VAT rate, generally 20%, to the price of the products or services you provide. You have to make this clear to your customer at the point of any sale that you have to add the VAT to the price. You must keep a record of all transactions for your yearly VAT returns to be filled out correctly to HMRC.

Invoices need to include:

An invoice number
The invoice date (and the date the goods and services were supplied if this is different to the invoice date)
The name and address of your business
Your VAT registration number
The customer’s name and address
A description of the goods and services covered

For each item on your invoice, you should make clear:

The unit price excluding VAT
The quantity
The VAT rate
The total to pay excluding VAT
The amount of VAT to pay
Any cash discount

Contact Tax Advisory UK today and we will arrange a meeting with some of the UK’s most qualified and experienced Chartered Tax Advisors or Tax Investigators to help with all VAT inquiries. Please call 07908 074954.