VAT

 

FREQUENTLY ASKED QUESTIONS (FAQ) ON VAT

What is VAT?

VAT stands for Value Added Tax. It is tax charged on the sale of goods and services in the UK.

When does your business need to register for VAT?

Your business must register for VAT if its VAT Taxable turnover is more than £85,000. VAT Taxable turnover is the total value of everything you sell that is not exempt from VAT.

You may also decide to voluntarily register your business even if your VAT Taxable turnover is less than £85,000. This allows your business to recover some VAT on some of your business expenses.

I don't know how to register my business for VAT. Can you help?

Of course, VF Accountants can act as your accountant and help you register your business for VAT. Her Majesty's Revenue & Customs (HMRC) will then provide you with your VAT Registration Certificate and VAT Registration Number.

What is the amount of penalty I will have to pay if I register late for VAT?

The rate of penalty depends on how late you were in registering for VAT. It is worked out as a percentage of VAT due (that is, output tax less input tax). It is from the date you should have registered to the date when you became aware that you were required to be registered or the date you received notification.

Note that there is a minimum penalty of £50.

 

 

What is Making Tax Digital (MTD) for VAT?

If your VAT Taxable turnover exceeds the current VAT Registration threshold of £85,000, then you are required to keep digital records of your sales and purchases. You will neeed to submit VAT returns using MTD-compatible software.

Registered late

Penalty rate of VAT due

Not more than 9 months

5%

More than 9 months but not more than 18 months

10%

More than 18 months

15%

Submit Making Tax Digital VAT Return

What do I do if I don't know how to prepare and submit my VAT Returns?

You don't need to worry. VF Accountants can prepare your VAT returns. We will request that you review what we have prepared and authorise us to submit your VAT returns on your behalf.

What periods do VAT returns cover?

Most often, VAT returns cover 3 months (Quarterly).

What is the deadline to submit and pay VAT returns?

VAT returns must be submitted and paid for by 1 calendar month and 7 days after the end of the VAT Accounting period. If the deadline falls on a weekend or bank holiday, then submission and payment need to reach HMRC by the previous working day. 

What happens if I pay the full VAT amount owed but I submit my VAT return late?

HMRC will not record a "default".

What happens if I submit my VAT return and make VAT payment late?

HMRC will record a "default". If your taxable turnover is less than £150,000, you will incur the following surcharges (extra money to pay):

Defaults

Surcharges

1st

2nd

3rd

None but HMRC will issue a letter with help and guidance

None but HMRC will issue you with a Surcharge Liability Notice

2% of outstanding VAT

4th

5th

6th and subsequent

5% of outstanding VAT

10% of outstanding VAT

15% of outstanding VAT

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