Business Tax
VAT Services
Magnus Accounting will help to ensure that your business is complying with all the relevant VAT regulations.
VAT Services
We highlight the key VAT areas you need to consider when running your business. If you are starting or have recently started a business in the Aberdeenshire area we, at Magnus Accounting, can help you comply with the VAT regulations.
VAT registered businesses act as unpaid tax collectors and are required to account both promptly and accurately for all the tax revenue collected by them.
The VAT system is policed by HMRC with heavy penalties for breaches of the legislation. Ignorance is not an acceptable excuse for not complying with the rules.
We highlight below some of the areas that you need to consider that may be of your interest.
It is however important for you to seek specific professional advice appropriate to your circumstances.
What is VAT?
- there is a supply of goods or services
- it was made in the UK
- it was made by a taxable person
- it was made in the course or furtherance of business.
Businesses charge VAT on their sales. This is known as output tax and the sales are referred to as outputs. Similarly VAT is charged on most goods and services purchased by a business. This is known as input tax.
The output tax is collected from the customer by the business on behalf of HMRC and must be regularly paid over to them by being included in a VAT return.
However, the input tax suffered on the goods and services purchased can be deducted from the amount of output tax owed, so that only the net tax due is paid to HMRC. Please note that certain categories of VAT can never be reclaimed as input tax, such as that in respect of third party UK business entertainment and most purchases of motor cars.
Points to Consider
Taxable supplies are mainly either standard rated (20%) or zero rated (0%). There is, in addition, a reduced rate of 5% which applies to a small number of certain specific taxable supplies.
There are certain supplies that are not taxable and these are categorised as exempt supplies.
There is an important distinction between exempt supplies and zero-rated supplies:
- If your business is making only exempt supplies you cannot register for VAT and therefore cannot recover any input tax.
- If your business is making zero-rated supplies you should register for VAT as your supplies are taxable (albeit at 0%) and recovery of input tax is allowed.
You are required to register for VAT if the value of your taxable supplies exceeds a set threshold. This threshold is applied in two different ways – either ‘looking back’ at the value of taxable supplies made in the previous 12 months, or ‘looking forward’ to taxable supplies anticipated in the next 30 days alone. The applicable threshold is £90,000 with effect from 1 April 2024.
If you are making taxable supplies below the threshold you can apply for voluntary registration. This would allow you to reclaim input VAT, which could result in a repayment of VAT, for example, if your business was principally making zero-rated supplies.
If you have not yet started to make taxable supplies but intend to do so, you can apply for registration as an ‘intending trader’. In this way input tax on start up expenses can be recovered.
- individuals
- partnerships
- companies, clubs and associations
- charities.
Once registered you must make a quarterly return to HMRC showing the amount of output tax to be accounted for on sales income and the amount of deductible input tax on expenditure, together with other statistical information. All businesses must file their returns online using software that meets requirements set by HMRC.
In most cases, an online VAT return must be completed and submitted within one month and seven days from the end of the period it covers.
Electronic payment by the same due date is also compulsory for all businesses.
Businesses making zero-rated supplies and which receive net repayments of VAT may find it beneficial from a cashflow perspective to submit monthly returns.
Businesses with expected annual taxable supplies not exceeding £1,350,000 may apply to join the annual accounting scheme whereby they will make monthly or quarterly payments of VAT but will only have to complete one VAT return at the end of the year.
Businesses trading below the £1,350,000 taxable turnover threshold may also wish to consider the cashflow benefits of joining the cash accounting scheme, whereby VAT is accounted for on sales and purchases on a cash book basis, rather than on an accruals basis.
It is important that a VAT registered business maintains complete and up-to-date records. This includes details of all supplies, purchases and expenses.
In addition, a VAT account should be maintained. This is a summary of output tax payable and input tax recoverable by the business. All business records should be kept for six years.
The above records must be maintained in software that meets HMRC requirements. HMRC does not provide free software.
The maintenance of records and calculation of the VAT liability is the responsibility of the registered person but HMRC will need to be able to check that the correct amount of VAT is being paid. From time to time therefore a VAT officer may come and inspect the business records. This is known as a control visit.
The VAT officer will want to ensure that VAT rules are being applied correctly and that the returns and other VAT records are properly maintained.
However, you should not assume that in the absence of any errors being discovered during a visit, your business has been given a clean bill of health by HMRC.
- late returns/payments
- late registration
- errors in returns.
This is a scheme allowing smaller businesses (with annual taxable turnover not exceeding £150,000) to pay their VAT to HMRC calculated as a percentage of their total business income. Therefore no specific claims to recover input tax need be made and this can reduce the record-keeping requirements. The aim of the scheme is to simplify the way smaller businesses account for VAT, but for some businesses it can actually result in a reduction in the overall amount of VAT that is payable to HMRC.
Making Tax Digital for Business: VAT
Under Making Tax Digital for VAT (MTDfV), all VAT registered businesses must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.
There are some exemptions from MTDfV. However, the exemption categories are tightly-drawn and are unlikely to be applicable to most VAT registered businesses.
How we can help
Ensuring that you comply with all the VAT regulations is essential. We can assist you in a number of ways including the following:
- tailoring your accounting systems to bring together the VAT information accurately and quickly
- ensuring that your business is VAT efficient
- providing assistance with the completion of VAT returns
- negotiating with HMRC if disagreements arise and in reaching settlements
- advising as to whether any of the available schemes may be appropriate for you
- helping you comply with the MTD for VAT regime.
If you are starting, or have recently started a business in the Aberdeenshire area and you would like to discuss any of the points mentioned in this VAT summary please contact us at Magnus Accounting.
Understanding the issues surrounding Value Added Tax (VAT) is essential to the successful running of a business or company.
HMRC makes frequent changes to the way in which the VAT scheme is operated. As such, businesses are advised to seek the help and support of a team of experienced accountants. That is where we can help.
Magnus Accounting will help to ensure that your business is complying with all the relevant VAT regulations. We assist with VAT registration; VAT planning and administration; and making use of the most appropriate scheme for your needs.
Our team can also advise on VAT control and reconciliation; finalising and filing VAT returns; and can negotiate with the Revenue during disputes, and act on your behalf at VAT tribunals.
Simply contact us to find out more about our VAT service.
Speak to one of our professionals today. Call our friendly team on + 44 7521 600065 or email us at info@magnusaccounting.co.uk
Ruchi is an absolute star. I’m a sole-trader and she keeps me firmly in check and makes sure I’m remembering to claim for all the right things. She doesn’t mind when I present her with a box of receipts, although she does try and make me more organised. Her work is always faultless, prompt and if I ever need anything she is happy to help me without me having to make an appointment. I recommend Magnus Accounting to all my clients.
Claire Taylor
The best accountants I ever had. Very responsible, professional and happy to help at anytime… I would highly recommend them😊
Nails by Ruta
I have recently started a small business and Magnus Accounting couldn’t have been more helpful. They are always available to help and answer any questions. Very knowledgeable and very friendly. Highly recommend!
April Henderson
Very helpfully and professional, highly recommending x
Egle Greig
Highly recommend, very professional and reliable Service,, beeen with Magnus Accounting for last 4 years,, always keep updated with newsletters and always available go help..
Glad i chose Magnus Accounting for all my business and personal accounting service.
Highly Recommended.
Vikesh Sharma
Magnus accounting has been proving accounting services to my company from the last 18 months, before this, I have used various high profile accountant, but I found work by Magnus accounting to be very accurate and reliable. Magnus accounting’s intricate knowledge of finance and budgeting was a tremendous help to me and my company, so I recommend highly.
Kanti Lakhankar
Magnus accounting has been with us since the start of our business and they have helped us from day one to put system in place and also provide payroll service ,VAT service ,Pension and overall book keeping and accounts management .Both Ruchi and Sashin are great professional and just a call way for all your personal and professional business and accounts need . Thank you guys for wonderful service !
Jagdish Bisht
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