VAT Factsheet by the Team at VJH accountancy
When do you need to register for VAT?
You must register for VAT if:
- your VAT taxable turnover is more than £83,000 (the ‘threshold’) in a 12 month period
- you receive goods in the UK from the EU worth more than £83,000
- you expect to go over the threshold in a single 30 day period
You must register within 30 days of your business turnover exceeding the threshold. If you register late, you must pay what you owe from the point you should have registered.
How do you register for VAT?
To register you need to go to https://online.hmrc.gov.uk/registration/newbusiness/business-allowed or, you can register by post, if:
- you want to apply for a ‘registration exception’
- you’re an EU business ‘distance selling’ to the UK
- you import (‘acquire’) goods from another EU country
- you’re joining the Agricultural Flat Rate Scheme
- you’re registering the divisions or business units of a body corporate under separate VAT numbers
- you’re disposing of assets on which 8th or 13th Directive refunds have been claimed
Your VAT Registration Certificate should come through within 14 working days.
If you need help with registering, or the submission of your returns, you can appoint an agent to deal with HM Revenue & Customs on your behalf.
How to account for your VAT?
There are two methods in which you can calculate your VAT returns:
VAT Cash Accounting Scheme: with the cash accounting scheme, you:
- pay VAT on your sales when customers pay you
- reclaim VAT on purchases when you pay your supplies.
The VAT Cash Accounting Scheme can only be used if your VAT taxable turnover is £1.35million or less.
VAT Accrual Accounting Scheme: with the accrual scheme, you:
- pay VAT on your sales when you raise your invoice
- reclaim VAT on purchases when you receive your invoices from supplies
Other Schemes Available to Clients:
VAT Annual Accounting Scheme
- The Annual Accounting Scheme you only need to submit 1 VAT Return a year – instead of 4 quarterly returns.
On this scheme you make advance VAT payments towards your bill – which is based on your last return, or an estimate if you’re new to VAT. This can be either monthly, or quarterly payments, with a final payment within 2 months of the end of accounting period.
Your turnover must be £1.35million or less in the next 12 months.
To join this scheme, you will need to register online (only if you do this at the time of VAT Registration), or send in the form VAT600 AA if you’re already registered.
VAT Flat Rate Scheme
- With the VAT Flat Rate Scheme you pay a fixed rate of VAT to HMRC dependent on the sector in which your business lies.
You keep the difference between what you charge to your customer and pay to HMRC and receive a 1% discount in the first year of trading.
You can’t reclaim the VAT on your purchases – except for certain capital assets over £2,000.
To join the scheme your VAT turnover must be £150,000 or less (excluding VAT).
To register, you can register online (only if you do this at the time of VAT Registration) or by post by filling in the VAT600 FRS if you’re already registered.
When do you have to file your VAT Return?
The deadline for submitting the return online and paying HMRC are usually the same – 1 calendar month and 7 days after the end of an accounting period. You need to allow time for the payment to reach HMRC’s account.
The deadline for Annual Accounting Schemes is 2 months after the end of your accounting period.
Surcharges & Penalties
If you do not complete your VAT return by the deadline, or pay the VAT due in full by the deadline, HMRC will record a default on your account.
HMRC will put you in to a ‘surcharge period’ upon a default, which lasts 12 months.
If you default for a second time within 12 months, HMRC will extend the ‘surcharge period’ for a further 12 months and you may have to pay an extra amount (a ‘surcharge’) on top of the VAT you owe.
HMRC will write to you explaining any surcharges that they charge.
HMRC can charge you a penalty of up to:
- 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy
- 30% of an assessment if HMRC sends you one that’s too low and you don’t tell them it’s wrong within 30 days
- £400 if you submit a paper VAT Return, unless HMRC has told you you’re exempt from submitting your return online
Further details of surcharges and penalties can be found on the HMRC website: https://www.gov.uk/vat-returns/surcharges-and-penalties