If the value of your taxable supplies exceeds a set annual figure (£83,000 from 1 April 2016), you are required to register for VAT.
Even if you are making taxable supplies below the registration limit, it is possible to apply for voluntary registration. This is beneficial if your business was principally making zero rated supplies. As this would allow you to reclaim input VAT, which could result in a repayment of VAT.
Even if you have not yet started to make taxable supplies but intend to do so, you can apply for registration. In this way input tax on start-up expenses can be recovered and a refund will be due.
A taxable person is anyone who makes or intends to make taxable supplies and is required to be registered. For the purpose of VAT registration, a person includes:
- companies, clubs and associations
In cases that an individual carry on two or more businesses all the supplies made in those businesses will be added together in determining whether or not the individual is required to register for VAT.
Once you become VAT registered you must submit online a quarterly return to HMRC. This VAT return shows amounts of output tax, deductible input tax together with sales and purchases figures. The VAT returns must be submitted within one month and 1 week of the end of the period it covers.
Electronic payment of VAT liability is also compulsory for all businesses.
It is beneficial for businesses who make zero rated supplies and who receive repayments of VAT to submit monthly returns.
It is important that up to date records are kept by a VAT registered business. These records include details of all supplies, purchases and expenses. Additionally, a VAT account should be maintained. This is a summary of output tax payable and input tax recoverable by the business. The above records should be kept for six years.
The maintenance of the records and calculation of the VAT liability is the responsibility of the registered person. However, HMRC will need to be able to check that the correct amount of VAT is being paid over. So, from time to time a VAT officer may come and inspect the business records. During the control visit the VAT officer will check to ensure that VAT is applied correctly. And that the VAT returns and other VAT records are properly written up.
However, even in the absence of any errors being discovered, you should not assume that your business has been given a clean bill of health.
Offences and penalties
HMRC have wide powers to penalise businesses who ignore or do not apply the VAT regulations properly. Penalties can be applied in respect of the following:
- late returns/payments
- late registration
- errors in returns
If you are starting or have started a business in Lewisham, Bromley, Kent and London areas we, at Adiva Accountants in Lewisham, can help you comply with the VAT regulations. Please do not hesitate to contact us at Adiva Accountants in Lewisham.