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VAT Advice

VAT can be a very complex taxation system especially where the transactions for the business involves cross border transactions. We help plan the structures required to ensure all VAT is reclaimed in UK and other EU countries which the business has a relationship with.


VAT is a direct tax payable by the consumer but many businesses are forced to act as unpaid tax collectors. There are heavy fines for failing to operate the system properly consequently, you cannot just ignore VAT and there are certain areas you should consider in detail


What does VAT apply to?


VAT applies to businesses that make supplies of goods or services Businesses charge VAT on their soles and this is known as output VAT. Similarly, VAT will be suffered on purchases and this is known as input VAT.


If outputs exceed inputs, payments of tax have to be made to HMRC on a regular basis. If inputs exceed outputs, a repayment of tax will be made to the business. However, there are some types of input VAT, such as VAT on entertainment that may not be reclaimable.




Certain supplies are not taxable at all and are known as exempt supplies. Others are taxable at the zero rate (0%), reduced rate (5%) or standard rate (20%).


If the business makes totally exempt sales, you cannot register for VAT or reclaim any of the input VAT suffered.   This can affect the competitiveness of your business.


If the business makes zero rated sales, you can register and reclaim the input tax suffered. Your business can benefit significantly in this situation However, what constitutes an exempt or zero rated supply can be difficult to decide and may need careful consideration.


Do I Need to Register?

You only have to register if the taxable supplies made by the business exceed dn annual figure, currently £70,000 If your supplies fall below this you may be able to register voluntarily and obtain a repayment This usually happens when you are making zero rated sales

Tax Tip

If you are setting up a business but have not yet started mdking supplies, you should register so that you can reclaim your input tax on start-up expenses.


Record Keeping


You must keep detailed records of purchases, sales and expenses, as well as a summary of input and output tax these records must be kept for six years. Failure to do so can lead to substantial penalties


When do I have to Make a Return to HMRC?

Generally, once registered you will make a quarterly return to HMRC. summarizing the outputs and inputs. It must reach HMRC within one month after the end of the quarter

Businesses that make zero rated supplies and receive repayments of VAT may find it beneficial to submit monthly returns


Businesses with expected annual taxable supplies under £1,350,000 may apply to join the annual accounting scheme whereby they will make monthly or quarterly payments of VAT but will only hove to complete one tax return at the end of the year.


Inspection of Records


The maintenance of records and calculation of the liability is the responsibility of the registered person but HMRC will need to be able to check that the correct amount of VAT is being paid over from time to time therefore a HMRC officer will come and inspect the business records.


The HMRC officer will want to ensure that VAT is applied correctly and that the returns and other VAT records are properly written up.


Offences and Penalties

HMRC have wide powers to penalise businesses who ignore or incorrectly apply the VAT regulations Penalties can be levied in respect of the following:

  • late returns/payments
  • late registration
  • Errors in returns.

There are a number of different schemes which can be used to aid cash flow and reduce administration some of these ar listed below.


Annual Accounting Scheme

Flat Rate Scheme

Cash Accounting Scheme

Retail Scheme

Vat Bad Debt Relief


Please talk to us if you are interested in any of the special schemes.  Most problems with VAT arise from poor record keeping and lack of understanding of the VAT system.


How we can help


If you would like to discuss any of the above please contact KRA below  so we can arrange a No obligationFREE initial meetingat your premises or our office to carry out a business review.


If you are interested in instructing us we will offer you a FIXED FEE accountancy service with no hourly charges or hidden costs.

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