VAT FLAT RATE SCHEME
-What is there to know about VAT? The Output and Input Tax? Let’s take a closer look at it. Output Tax is the VAT that is calculated and charged on the sale of goods and services from one’s businesses if it is VAT-registered. Moreover, input tax is the VAT that is added to the price for goods or services that are purchased for the operation of the business. Output VAT less the Input VAT is the total amount payable to HMRC. However, if the input VAT is greater than the Output VAT, HMRC will refund instead.
The standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%) for most goods and services. A reduced rate of 5% for some goods and services such as children’s car seats and home energy. A zero rate for goods and services such as food and children’s clothes. Zero-rated means that the goods are still VAT-taxable but the rate of VAT one must charge to the customer is 0%. Some things are also exempt from VAT such as postage stamps, financial and property transactions.
Every VAT registered business must be able to know what is the right VAT rate to charge to its customers (known as Output VAT). The VAT information must be clearly shown on the invoice as well. On the other hand, one can also reclaim the VAT paid (known as Input VAT) on goods and services purchased for use in one’s business. One must keep records to support the claim and must have valid VAT invoices. However, there is also VAT that could not be reclaimed such as goods or services used solely for private purposes and business entertainment costs.
One must submit a VAT Return to HM Revenue and Customs (HMRC) every three months, which is known as the accounting period. The VAT Return records things for the accounting period’s total sales and purchases, amount of VAT payable, amount of VAT to reclaim, and amount of VAT to refund from HMRC. One must submit a VAT Return even if there is no VAT to pay or reclaim.
If further clarification is needed or further assistance is required, please feel free to contact Cheylesmore Accountants. You may send your email to info@cheylesmore.com and let us know your doubts