When do you need to register for VAT?
If you are an individual, partnership or business and your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £77,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT.
How do I register for VAT?
You must first register for HMRC on-line services- https://online.hmrc.gov.uk/login
Then: by contacting HMRC on line on http://www.hmrc.gov.uk/vat/start/register/signup-online.htm
How
do I submit my returns and pay my VAT due?
Since 1st
April 2012 almost all VAT-registered businesses are required to submit their
VAT Returns online and pay any VAT due electronically.
What records do I need to keep?
You must keep
records, (either electronic or paper), of all VAT related sales and purchases.
You need a valid VAT invoice to reclaim VAT
You can normally only reclaim VAT on your purchases if you buy an item and
use it for business purposes AND you have a valid VAT invoice for the purchase.Only VAT-registered businesses can issue valid VAT invoices. You cannot
reclaim VAT on any goods or services that you buy from a business that is not
VAT registered.
What a VAT invoice must show..
A VAT invoice must show:
- an invoice number which is unique and follows on from the number of the previous invoice - if you spoil or cancel a serially numbered invoice, you must keep it to show to a VAT officer at your next VAT inspection
- the seller's name or trading name, and address
- the seller's VAT registration number
- the invoice date
- the time of supply (also known as tax point) if this is different from the invoice date - see below
- the customer's name or trading name, and address
- a description sufficient to identify the goods or services supplied to the customer
For each different type of item listed on the invoice, you must show:
- the unit price or rate, excluding VAT
- the quantity of goods or the extent of the services
- the rate of VAT that applies to what's being sold
- the total amount payable, excluding VAT
- the rate of any cash discount
- the total amount of VAT charged
If you issue a VAT invoice that includes zero-rated or exempt goods or services, you must:
- show clearly that there is no VAT payable on those goods or services
- show the total of those values separately
If you make retail sales and you make a sale of goods or services for £250 or less including VAT you can issue a simplified VAT invoice
Simplified VAT invoices
If you make retail sales and you make a sale of goods or services for £250 or less including VAT, then when a customer asks for a VAT invoice, you can issue a simplified VAT invoice that only needs to show:
- the seller's name and address
- the seller's VAT registration number
- the time of supply (tax point)
- a description of the goods or services
Also, if the supply includes items at different VAT rates then for each
different VAT rate, your simplified VAT invoice must also show:
- the total price including VAT
- the VAT rate applicable to the item
If you accept credit cards, then you can create a less detailed invoice by adapting the sales voucher you give the cardholder when you make the sale. It must show the information described in the six bullets above
You need to keep copies of any less detailed invoices you issue.
The Flat Rate Scheme
The flat rate scheme can offer significant savings to businesses which have much higher VAT outputs and comparatively low inputs, (purchases).
Under this scheme you calculate your VAT payments as a percentage of your total VAT-inclusive turnover but you will not be able to reclaim any input VAT on purchases you have made.
However, you will only have to pay over to HMRC a “flat rate” of your turn over, for example 14.5% for Lawyers and Barristers, whilst you continue to charge out VAT on your services at the normal 20% rate.
Different Flat Rates apply to different Business sectors.
Once on the scheme you may continue to use it to account for VAT until your total business income exceeds £230,000 for a 12 month period.
1. Entertainment costs
VAT cannot be recovered on the cost of providing ‘business entertainment. Business entertainment covers all forms of hospitality, such as food and drink, hotel accommodation, theatre tickets, and entry to sporting events. However, VAT on ‘staff entertainment’ costs can be recovered, unless being provided just to the sole proprietor, partners or directors (owners/directors with staff is OK), or to an employee whilst providing entertainment to a non-employee.
2. Subsistence Costs
The VAT on travel and subsistence is deductible if incurred for business purposes, and covers things like drinks, meals, and overnight accommodation. Unlike for staff entertainment, the costs are still deductible where incurred solely by business owners or directors
Tax point or time of supply
The tax point, or time of supply, is the date when a sale is considered to take place for VAT purposes. There are rules that tell you if this is the date of the actual supply, the date of the invoice or some other date, depending on the circumstances.
It's important to put the right date for the time of supply on your invoice, because both you and your customer will need this information to make sure the VAT on the invoice is accounted for on the right VAT Return.
You must also issue invoices within a certain time of the actual supply taking place -
If your customer pays in cash you must, if they ask you to, show on the VAT invoice that you have received payment and when you received it.
When a VAT invoice must be issued
If you are registered for VAT you must give any VAT-registered customers a VAT invoice for any standard-rated or reduced-rated goods or services you sell them.
If you are a retailer, you do not need to issue a VAT invoice or receipt unless your customer asks for one.
As a VAT-registered supplier, you may be liable to a fine if you do not issue a VAT invoice for a supply you have made when asked to do so by a VAT-registered customer.
Pro-forma invoices
If you need to issue a sales document for goods or services you haven't supplied yet, you can issue a 'pro-forma' invoice or a similar document to offer goods or services to customers.
A pro-forma invoice is not a VAT invoice, and you should clearly mark them with the words 'This is not a VAT invoice'.
If your potential customer accepts the goods or services you're offering them and if you actually supply them, then you'll need to issue a VAT invoice within the appropriate time limit - see the section in this guide on time limits for issuing invoices.
If you've been issued with a pro-forma invoice by your supplier, you can't use that to claim back VAT on the purchase. You must obtain a VAT invoice from your supplier.
Time limits for issuing VAT invoices
There is a strict time limit on issuing VAT invoices. You must normally issue a VAT invoice (to a VAT-registered customer) within 30 days of the date you supply the goods or services - or if you were paid in advance, the date you received payment. This is so your customer can claim back the VAT on the supply, if they're entitled to. You can't issue invoices any later without permission from HMRC except in a few limited circumstances.