The Value Added Tax (VAT) is an indirect tax charged on most goods and services. In the case that a VAT registered business buys goods or services subject to VAT, it will be entitled to claim a repayment from HMRC for tax paid.
Three types of VAT rates vary according to the products sold or services provided. The rates applied are as follows:
- Standard rate 20%
- Reduced rate 5%
- ZERO 0%
There are also some goods and services to take into consideration where:
- The VAT is not charged - exempt
- There is no need to include them in the VAT calculation – outside of scope
Any VAT due can be reported to HMRC on a monthly or quarterly basis by completing the "VAT return" of the period. However, in some circumstances, the VAT compliance can be processed annually by benefiting of special arrangements. Furthermore, any VAT due from HMRC will be refunded to the business within six weeks from the end of the period.
Also, there is a threshold, below which a business does not have to register a for VAT. These cases are related to activities where the annual turnover, reported in the fiscal year, is less than £ 85,000. Nevertheless, any business is obliged to register for VAT, when they carry on a trading volume over £ 85,000.
WellTax's team offers consultancy solutions and support regarding the dealing with VAT and indirect taxation, providing planning, registration, refunds and monitoring of VAT and all indirect taxes relating to the businesses. Learn more.