VAT registered companies have by law to submit VAT returns which give full and accurate details of VAT payments by customers and VAT charged by suppliers. The VAT return will also show how much VAT is owed by a business, or the amount to be refunded.
As VAT experts, Perrys Accountants can guide you through VAT accounting, including how to select and use accounting software which is compliant with HMRC’s Making Tax Digital (MTD) initiative.
Who has to register for VAT?
Businesses including sole traders with an annual turnover of £85,000 or more have to register for VAT with HMRC. Businesses can register themselves online, or authorise their accountants to register on their behalf.
Returns are usually quarterly, but HMRC also gives businesses the option of registering for monthly and annual payments. You need to keep VAT records for at least six years.
Making Tax Digital for VAT
Since April 1st 2019, most VAT registered businesses earning over £85,000 have had to sign up for Making Tax Digital (MTD).
To carry out business under MTD you have to have compatible software. Gov.uk features a guide to approved software, and at Perrys we can help you through system choices which fit in best with your business and the way you operate.
From the date you register, you must:
- charge customers the correct amount of VAT
- record VAT you pay to suppliers
- submit VAT returns
- pay any VAT due to HMRC
- keep VAT records and a VAT account
Approved software can carry out your VAT calculations for you, submit your returns and keep records for as long as HMRC and your business require.
What is the VAT rate?
The standard rate is 20% and applies to a very broad range of products and services. The tax applies to business purchases as well as consumer goods.
There are VAT exemptions and zero-rating for a limited range of items including books, newspapers, children’s clothing, some foods and drinks, and goods exported from the UK. A 5% rate applies to certain products and services including domestic fuel and power, installation of energy saving materials and child car seats. At gov.uk you can see the full list of goods and services which attract non-standard VAT rates and also VAT exemptions.
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