Businesses with taxable supplies in excess of £85k must register for VAT but there may be advantaged in registering voluntarily. VAT returns must be submitted on a periodic basis (typically quarterly) and must be accurate and on time to avoid penalties.

     Does my business need to register for VAT?

Businesses who make taxable supplies in excess of £85k over a rolling 12 month period must register with HMRC for VAT and file periodic returns. Depending on your individual circumstances there may be advantages in registering voluntarily. There are also a number of different schemes which can impact on the way VAT is calculated and paid e.g.: Flat Rate, Cash Accounting and Annual Accounting as well as some Margin Schemes. Therefore, the type of business you run may have an impact on which scheme you operate.

     How do I calculate what VAT I should pay?

The standard rate of VAT is 20% but there are exceptions for many products and services. From the date you register you must ensure you charge your customers the correct amount and broadly, any VAT you incur on purchases made for your business may be offset against this amount. Complexities will arise for any purchases or supplies made outside the U.K or on exempt supplies but having accurate bookkeeping helps ensure VAT Returns are accurate.

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     What is the deadline and are there penalties?

VAT Returns must be submitted on a periodic basis, typically quarterly.  The return submission and payment of VAT is due one month and 7 days post the VAT period end date (i.e. if the VAT period end is the 31st March submission and payment is due by the 7th May). Late filings incur penalty points which will lead to a £200 penalty once the points limit is reached (usually 4 points) and interest is charged on late payments. Therefore, it is always important that VAT is both filed and paid on time.