What is VAT?
By law, a business has to register for VAT when their sales reach £73,000 or it’s likely that they will in a calendar year.
But what is VAT? Basically it’s a tax on goods & services. But not all goods & services. So if you sell children’s clothes or books & magazines vat’s not applicable. But it is on adults clothes!
The standard rate of VAT in the UK is 20%, which means that if you are selling a product for £1,000 then you have to add VAT of £200 making your total sales price £1,200. Many people forget about VAT when they’re pricing their goods & services.
As a VAT registered business you have to prepare quarterly VAT Returns (although the are annual schemes for certain types of business). On your return you calculate the net amount of VAT you have to pay over to HMRC by deducting VAT that you’ve been charged on goods & services that you have bought from the total amount of VAT on your sales for that quarter. Confused? Watch a short video here.
Many people now take advantage of the Flat Rate Vat Scheme, which makes the administration of vat much simpler. It works very well for particular types of businesses, such as contractors, and most will actually make a profit from it. How cool is that – making profit on tax!!
At QAccounting we work with many clients who are VAT registered. We help simplify the process for our clients, and have recently put in place a fantastic scheme with Enterprise North East Trust where ENET will pay the first three months of QAccounting’s fees for any new businesses registering for VAT. Free Accountancy! Worth up to £600!
All you have to do is be in the first three months of trading, have not registered for VAT yet, and not be a current client of ENET.
If you meet those criteria, or you know someone else who does, then get in touch with QAccounting right away.
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