VAT is the tax that is charged on most goods and services that VAT-registered businesses provide in The UK.
There are currently 3 rates of VAT:-
1. Standard - 20% - covers most goods and services
2. Reduced - 5% - e.g. installing energy savings materials
3. Zero – e.g. children’s clothes and shoes
Also, some goods and services are exempt (e.g. insurance).
You can register for VAT if you are in business:-
1. Individual (sole trader)
5. Association or charity
However, you DON’T have to register for VAT if your annual turnover (sales income) is less than £79,000.
BUT, if your turnover is less than £79,000 you can apply for voluntary registration. In some circumstances this can be beneficial.
For example, if you sell zero-rated items and buy standard-rated items you would receive a VAT-refund from HMRC.
This can be quite a complicated topic and I’d advise you to seek more assistance from HMRC.
Visit HMRC website (www.hmrc.gov.uk) for more information. Or, telephone the VAT Helpline on 0845 010 9000 (lines open 8.00am to 6.00pm, Monday to Friday).
Guest blog by Enterprise Enabler John Jones