VAT Returns

1. What is VAT?
2. Are there different rates of VAT?
3. What are taxable supplies?
4. VAT registration
   
   < Back to Accountancy

1. What is VAT?
Value Added Tax (VAT) is a tax businesses charge when they supply their goods and services in the United Kingdom (UK) or Isle of Man (IOM). It is also charged on goods, and some services, that are imported from places outside the European Community (EC) and on goods and services coming into the UK from another EC Member State. The following are examples of business supplies:

• selling new and used goods, including hire purchase;
• providing a service, for example, hairdressing and decorating;
• charging an admission price to go into buildings; or
• self-employed people providing supplies, for example, some salesmen and subcontractors.

2. Are there different rates of VAT?

Yes, there are three rates:

3. What are taxable supplies?

The supply of any goods and services which are subject to VAT at any rate, including zero-rated, are called taxable supplies. They are referred to as taxable supplies whether you are registered for VAT or not. If the value of your taxable supplies is over a specified limit, you are required to register for VAT. If you are registered for VAT, you must charge and account for VAT on all your taxable supplies from the date that you are first registered.

4. VAT registration

Registration for VAT is compulsory in certain situations, but also available on a voluntary basis subject to specific criteria. The rules for both are summarised below.

You MUST register for VAT when:

• The value of your taxable supplies exceeds the registration threshold
  The value of your taxable supplies in the past 12 months or less has exceeded the current VAT registration threshold of £56,000, or the value of your taxable supplies in the next 30 days alone is expected to exceed this threshold.
• The value of your distance sales in the UK exceeds the distance selling threshold
  If you are a supplier in another EC country and the value of your distance sales to the UK has exceeded £70,000 in the calendar year, or part year, from 1 January.
• The value of your acquisitions from other EC countries exceeds the registration threshold
  If the value of your acquisitions from other EC countries in the calendar year, or part year, from 1 January has exceeded £56,000, or the value of your acquisitions in the next 30 days alone is expected to exceed this threshold.

You may wish to apply to register for VAT on a VOLUNTARY basis when:

• The value of your taxable supplies is below the registration threshold
  The value of your taxable supplies is below the threshold, and you want to register for VAT on a voluntary basis, as you feel that this will benefit your business.
• The value of your distance sales in the UK is below the distance selling threshold
  You are a supplier in another EC country and the value of your distance sales is below the distance selling threshold, currently £70,000.
• The value of your acquisitions from other EC countries is below the registration threshold
  The value of your acquisitions from other EC countries in the calendar year or part year is below the threshold.
  
  < Back to Accountancy