Nov 12, 2020 Author: Accounts Junction
All You Need to Know About VAT Return in the UK
VAT is Value Added Tax which is levied on the consumers by businesses on items or services purchased. It is levied on most consumer goods in the United Kingdom and is set at 20% at present. There are various benefits that a business can get by implementing VAT and filing a VAT return in the UK.
Benefits of getting registered for VAT
- Charging VAT on all your services and products, as a result, your tax liabilities get transferred to customers.
- Opportunity to reclaim for a VAT refund if you have incurred any cost for the purchases and expenses.
- Your VAT registered customers can also get to claim VAT levied by you on sales.
- It increases the goodwill and credibility of your company to your stakeholders and customers.
- There are clients or customers who want to deal only with VAT-registered companies; you can take advantage here as you would be allotted a unique VAT number.
Calculation of VAT
The primary things required for a business to file a VAT return in the UK is to be familiar with various tax rates falling under VAT. Till 2011, the standard VAT was 17.5% which has been increased to 20%. In general, a business has to register for VAT if the annual revenues amount more than £85k. There are mainly two VAT applications that a business should keep in mind for UK accounting.
1. The standard VAT application:
In this scheme, a 20% rate is being levied to consumers by a business on behalf of Her Majesty's Revenue and Customs (HMRC). In this way, a business can take advantage of claiming back the expenses that attract 20% VAT. In simple words, a business would only pay the amount of difference between VAT charged by it on its products/services and VAT paid by the business for expenses incurred.
2. The Flat rate application:
This scheme is made to help small businesses in paying VAT to HMRC in a simple calculative manner. Here, a flat rate is levied on a business, which has to be paid on total turnover for a particular time period like a quarter.
Apart from that, the other rates are as follows.
- On certain goods and services, a reduced rate of 5% is charged, i.e. home energy products, children related products like car seats.
- Certain Food and drink, animals, animal feed, plants and seeds attract 0% VAT.
- There are also certain exempted items like insurance, postage stamps or services, health service by Doctors.
Filing a VAT return in the UK
A business can file returns for VAT through an online VAT account and VAT number by using the free online services or accounting software provided by HMRC. Your online VAT accounts would notify you about the time by which you have to pay the VAT for your business. In general, the deadlines are one calendar month and 7 days later when an accounting period ends. It can be easily paid through debit card or netbanking.
Why Choose Accounts Junction?
Accounts Junction has been providing its valuable services in this field for more than a decade. We compile with all the necessary regulations provided by HMRC and make sure of timely filing of VAT returns for the UK. For more details, Contact us now!
