VAT Advice for Small Businesses

If you run a small business, you may be wondering when you have to pay VAT, how much you have to pay and how to sort it out. Small business VAT can seem like quite a simple tax on the face of it, but the truth is it can become complicated, and you may need some VAT advice to help you sort it out.

Here's a guide to what you need to know about VAT registration and payment for your small business.

What Is VAT?

VAT, or Value Added Tax, is a tax that is added onto the price of most (but not all) goods or services. The amount added is a percentage of the value of the product being sold.

VAT is a tax that is paid by your customers. You are responsible for collecting the tax and passing it on to HMRC.

The standard rate of VAT is 20% of the value, so if your item costs £100, you will charge £120 once the VAT has been added. This percentage varies, however, and we will look at this shortly.

Is VAT Added to Everything?

VAT is not added to all products and services. Some products or services can be zero-rated or exempt. If you click here it will give you a breakdown.

Some goods and services also have a lower rate. This is called the Reduced Rate, and it is 5% of the value rather than the Standard Rate of 20%.

Does Your Business Have to Pay VAT?

Not every business needs to register for VAT, and it depends on the amount you earn from selling your products or services. This is where the VAT Threshold becomes important.

VAT registration is only necessary for businesses that have a turnover higher than the VAT threshold, which is £85,000. If you earn over this in any 12-month period, you will need to charge VAT. See this page for more information on the threshold.

If you earn this much from your business, or you expect to in the next 30 days, you will need to register for VAT. This is a simple enough process, but we can help you with it to make sure you do it properly.

Should You Register Anyway?

One of the key questions regarding small business VAT is whether to register even if you are not obliged to. Some may say this is actually a good idea. But why?

The answer is that it can help to improve the image of your business and make you look more credible. This may help you to attract more serious clients to your business. However, this may not always be the right choice, and it is a decision you will have to make.

Do You Always Have to Register For VAT?

There is one situation where you may not have to register for VAT, and this is where you expect your turnover to go over the threshold for a short period (e.g. where it goes above it for one month and then goes back below it).

In this situation, you may be able to avoid paying VAT, but you must contact HMRC. They will want to see evidence that you will not go over the threshold again in the next year, and they will then decide whether you should register or not.

Let Us Assist You

As you can see, when it comes to small business VAT, things can get quite complex quite quickly. That's where professional VAT advice can be very useful. VAT can cause complications when you don't get it right, and not paying when you should be registered is a serious issue.

We would be happy to help you with all of your VAT requirements. We also cover some of the most important dos and don'ts of VAT, which are worth looking through.

We provide tax advice for a large number of small businesses, and we can help you to sort out all of your VAT obligations. We can also support you if you are already registered but you are experiencing problems.

So contact us today and find out exactly what we can do for your small business.