VAT Returns and VAT Advice
VAT can be complicated, particularly when a business has different types of income, purchases goods or services from overseas, or needs to apply the VAT reverse charge.
GMS Accountants provides VAT registration, advice and return preparation for businesses in Cambridge and Nottingham. We can help you understand when VAT applies, what can be reclaimed and how much needs to be paid to HMRC.
The standard rate of VAT is 20%, although some goods and services are charged at 5% or 0%, while others are exempt. Our introduction to VAT explains the basic rules in more detail.
" Graham helped us enormously in our first year of trading as a limited company. He was responsive with advice, and flexible when we needed to talk to ask questions, and this helped us to have confidence that we're doing the right things to manage the financial side of our business. "
Oliver, Director, Cambridge Technical Marketing
Registering for VAT
A business must normally register for VAT if:
- Its VAT-taxable turnover exceeds £90,000 over any rolling 12-month period.
- It expects its VAT-taxable turnover to exceed £90,000 within the next 30 days.
- It is based outside the UK and supplies taxable goods or services in the UK, in which case different registration rules can apply.
Turnover should be monitored regularly rather than checked only at the financial year end. Registering late can result in VAT being due from an earlier date, together with possible penalties and interest.
A business can also register voluntarily when its turnover is below the threshold. This may be beneficial when customers are VAT-registered or the business has significant VATable costs. However, voluntary registration can add administration and may increase prices for customers who cannot reclaim VAT.
We can review your circumstances and help you decide whether registration would be appropriate. You can also read our guide explaining when a business should register for VAT.
VAT Rates and Exemptions
The VAT treatment depends on the goods or services being supplied:
- Standard rate – 20%: This applies to most goods and services.
- Reduced rate – 5%: This applies to certain supplies, including some domestic fuel and power and children’s car seats.
- Zero rate – 0%: This includes certain goods such as most food, books and children’s clothing.
- Exempt: This can include certain financial, insurance, education, healthcare and property-related services.
Zero-rated and exempt supplies are not the same. A zero-rated sale is still a taxable supply, whereas exempt income can restrict the VAT a business is allowed to reclaim.
VAT treatment can depend on the exact nature of a transaction, so it is important not to rely solely on a general category when raising invoices or reclaiming VAT.
VAT Accounting Schemes
HMRC offers several VAT schemes that may simplify reporting or help with cash flow:
- Flat Rate Scheme: VAT is calculated using a percentage based on the type of business. It can simplify record keeping but is not always the cheapest option, particularly where the limited-cost-trader rules apply.
- Annual Accounting Scheme: One VAT return is submitted each year, with interim payments made during the year.
- Cash Accounting Scheme: VAT is normally paid when customers pay you, and reclaimed when suppliers are paid. This can help businesses whose customers take longer to settle invoices.
The most appropriate scheme will depend on your turnover, business costs, customers and cash flow. GMS Accountants can compare the available options and explain the likely financial and administrative effects before you make a decision.
Preparing and Filing VAT Returns
Most VAT-registered businesses submit returns quarterly, although the reporting period can differ under certain schemes. Businesses must generally maintain digital records and submit their returns using software compatible with Making Tax Digital.
Preparing a VAT return involves more than comparing sales VAT with purchase VAT. The underlying transactions should be reviewed to make sure that:
- The correct VAT rates have been used.
- VAT has only been reclaimed where valid evidence is available.
- Sales and purchase figures agree with the accounting records.
- Overseas transactions have been treated correctly.
- Any relevant reverse-charge rules have been applied.
- Previous errors or adjustments have been included properly.
Our guide to checking VAT-return data and understanding the VAT boxes explains what should be reviewed before a return is submitted.
You can also read about Making Tax Digital and digital record keeping or our guide to the VAT reverse charge.
Why Use GMS Accountants for VAT?
Our VAT service can include:
- Reviewing whether and when you need to register.
- Completing your VAT registration with HMRC.
- Advising on the most appropriate VAT scheme.
- Reviewing transactions and checking VAT treatment.
- Reconciling the VAT figures to your accounting records.
- Preparing your VAT return and explaining the amount due.
- Submitting the return to HMRC after receiving your approval.
- Helping to correct errors on previous returns.
- Assisting with VAT queries and correspondence from HMRC.
We provide straightforward VAT support to businesses in Cambridge and Nottingham. You will know what information we need, when your return is due and how much needs to be paid.
Need Help With VAT?
Whether you are approaching the VAT-registration threshold, preparing your first return or looking for ongoing support, GMS Accountants can help. Please get in touch to discuss your business and VAT requirements.
