Most people have heard of value-added tax, or VAT, but how much do you actually know about it? In this plain English
guide, we’ll give you a simple run-down of what VAT is and how it impacts your business.
What is VAT?
VAT is a consumption tax that is imposed on the value at each stage of production and sale of most goods and
services. VAT registered businesses are required to charge VAT on their sales but can also claim back any VAT on
their purchases, and the net position is then due to HMRC.
The standard VAT rate in the UK is currently 20%, with certain goods falling under different rates or being VAT
exempt.
How Does VAT Affect Your Business?
This is the important question: how it affects your business. Any business can choose to register for VAT, with
any business reaching the registration threshold (which is currently set at a taxable turnover of £85,000 per
year). Once registered, your business will need to start including VAT on all sales at the relevant rate, but you
can then claim back any VAT on your purchases and any other costs that include VAT. These figures then need to be
filed to HMRC through a VAT Return (which under normal circumstances is quarterly) and the net position paid across
to HMRC.
If you’re looking to register for VAT, or if you are now required to, get in contact with us so that we can make
sure you are keeping updated on all your VAT responsibilities and assist with the registration process.
