You must register for Vat if your taxable turnover goes over £ 85,000 (threshold)
That is everything sold which is not vat exempt – Vat Types below:-
You must register for vat by the end of the month that your taxable income reached the threshold
You may get a penalty if you register too late.
You can register voluntarily if your business turnover is less.
You can reclaim 4 years vat back on purchases for goods you still have or that were used to make goods you still have. You can only claim back vat on services for 6 months. Any reclaim to be done on the 1st Vat return.
You need proof of purchase, invoice/receipt/dates/description and information on how they relate to the business.
Types of vat
Vat Exempt usually represented in software as code TO is for some goods and services example children’s clothes and food.
Standard Vat 20% usually represented in software as T1 is for most goods and services
Reduced Rate 5% Usually represented in software as T5 is for some goods and services example home energy
Vat Schemes
There are many different schemes the following list is not the full picture, depending if your business is unique , we can check the correct vat scheme for you if it not listed below.
Vat Flat Rate Scheme
The amount of VAT, a business pays or claims back from HM Revenue and Customs(HMRC) is usually the difference between the vat charged by the business to customers and the vat the business pays on their purchases. With the Flat Rate Scheme you pay a fixed rate of vat.
Eligibility
You are a vat registered business and you expect your business to be £ 150,000 or less in the next 12 months ( vat taxable turnover is everything sold that is not vat exempt)
There are exceptions, you’ve joined a vat group, or your business is associated with another business etc
You can apply for this scheme if you are classed as a limited cost business, if your goods cost less than either 2 % of turnover or £ 1000 a year, higher rate is 16.8%
In the first year only of joining the scheme there is a 1% reduction so the higher rate would be 15.8%
Flat rates differ depending on the type of business – currently their are over 60 different rates
How it works – based on a Hotel/ Accommodation Business the current flat rate is 5.5% to March 2022
The Hotel will charge the customer the full 20 % vat charge.
The Hotel can not reclaim any vat on purchases, except for certain capital assets over £ 2000
When the Hotel pays HMRC for tax collected from their customers you only pay 5.5% and you keep the 14.5% difference.
Example
A hotel charge a customer £ 1,200 inclusive of vat ( £1,000 plus £200vat)
So you would expect that you pay HMRC £ 200.00
What you will pay is:-
Your flat rate payment is 5.5% of (the full invoice total including vat ) £1,200.00
( £1,200.00 x 5.5%) = £ 66. You would keep £ 134
Here is a listing of other types of schemes, more details can be found on the Hmrc Website
Vat Cash Accounting Scheme
Vat Annual Accounting Scheme
Vat Retail Scheme
Tour Operators Margin Scheme
Vat Margin Scheme
The Capital Goods Scheme for vat
Vat Refund Scheme for Charities
Vat exempt items can be feed, postage etc for a full list go to hmrc.gov.uk