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VAT ACCOUNTING IN UK

  1. VAT ACCOUNTING IN UK

VAT ACCOUNTING IN UK


Value added tax or VAT is an indirect tax which is levied on consumption. This tax is known as value added because it is a charge on every value addition until the final consumption from its manufacturing.

For instance, a manufacturer purchases raw materials at a cost. He transforms it into a good. Then, he sold it to supplier and then supplier sells it to the seller. And finally, the seller sends it to the final consumer. The value added from every level will have to be paid at the end, which means by the final consumer.

In the United Kingdom, VAT is charged at the rate of 20% on the final consumption. However, this rate is for most of the product and not for all. VAT charge has its own exceptions and differs from product to product. It is reduced to only 5% on sanitary products, energy saving products, children's car seats. The VAT is charged on 0% when it comes to necessary everyday goods like food, newspaper, books, children’s clothing, etc.

When it comes to the treatment of VAT in accounting, it is treated under a separate liability account. While registered firms can claim input taxes, non-registered firms do not have this kind of benefit.

You must keep a separate record of the VAT you charge and the VAT you pay on your purchases. This record is called a ‘VAT account’.

You use the figures in your VAT account to complete your VAT Return.


VAT calculation in UK

  • Your total VAT sales
  • Your total VAT purchases
  • The VAT you owe HM Revenue and Customs (HMRC)
  • The VAT you can reclaim from HMRC
  • If your business uses the VAT Flat Rate Scheme - the flat rate percentage and turnover it applies to
  • The VAT on any EU acquisitions (purchases) or dispatches (sales)

How to file for VAT payment

The best way to keep things in order is to hire the right people for it. Meru accounting provides you the best services in town.

  • It keeps a record of all your bills and expenses.
  • All you have to do is use ‘Datamolino App’, click pictures of your bill and send us using the application.
  • Also, send across your bank receipt through mail.
  • Thus, a timely recorded data will help ease filling for your VAT return.
  • VAT Return has to be filled every 3 months to HMRC. You can also opt for Monthly Returns if your transactions are made through bank.
  • For quarterly VAT returns, due date will be 28th of the subsequent month following the end of the quarter. For the monthly return, the last date to file VAT return will be 28th of the subsequent month.
  • You must register your business for VAT with HM Revenue and Customs if its expected VAT taxable turnover is more than £85,000 in the next 30-day period or your business VAT taxable turnover is more than £85,000 over the last 12 months.
  • Various applications like Xero, Waveapp, Freshbooks, Quickbooks can be used for accounting purposes.
  • Hiring us keeps all your errors in Filing VAT Return at Bay.