Value Added Tax (VAT) is a term we’re all familiar with but understating your VAT responsibilities as a
business owner is something quite different.
Your business needs to register for VAT if your taxable turnover reaches or exceeds the threshold of £85,000 (tax year 2021/22) for a 12-month period ending in that tax year.
You can register your business for VAT via the HMRC website at www.gov.uk/guidance/register-for-vat Or you can leave all that paperwork to us!
VAT is calculated at 20%. For example, if you sell a product for £100, you will need to add VAT @ 20%, taking the price to £120.
As well as adding VAT to the products / services you sell, you will find that you’re also able to claim VAT on certain things that your purchase.
Your VAT return (we can take care of that too), essentially calculates all the VAT you have charged through your business sales and deducts the amount of VAT you have been charged on your business purchases – the difference will be what is due to HMRC. VAT returns are usually completed on a quarterly basis and payment is due within 1 month and 7 days of the end of each quarter.
Business sales = £100,000 in VAT
Business purchases = £50,000 in VAT
VAT return – £50,000 due to HMRC
(within 1 month and 7 days of the end if your VAT quarter.)
There are certain schemes available to help small businesses manage their VAT. These include the annual accounting scheme, the flat rate scheme and the cash accounting scheme. It is best to speak to one of our VAT experts to establish if one of these schemes could benefit your business.
Don’t feel overwhelmed – our VAT experts are here to help. Visit www.ellacottmorris.co.uk/vat-returns/ to find out more..
By Michelle Morris on 08/02/2022 06:00:00