When do i start charging vat

The reduced rate may apply depending on the type of product or service. It is generally charged on sanitary products, children's car seats and energy saving measures. For instance, it will apply to mobility devices if it is purchased by an individual over 60, and installed in his or her home. Any accountant should be able to quickly go over your sales and expenses and tell you which categories you do most of your business within.

Some examples of zero-rated items include books, newspapers, children's clothes and shoes and goods you export to non-EU countries. A few examples of exempt items include insurance, medical services provided by doctors and postal service. The full list of exempt items can be viewed on the Gov.

These transactions should however still be recorded in your general business accounts. These items include employee salaries, charges imposed by the government and donations to a charity. If your turnover is below a certain threshold, you will have no legal obligation to pay VAT.

If you fail to register on time , you'll need to pay what you owe from the date that the registration should have been effective. HMRC may also impose a penalty, depending on the amount you owe, how late your registration is and other situational factors.

You'll need to ensure you're tracking this and can be done easily with accounting software like FreeAgent. We also include this for free with all of our accounting packages. In certain circumstances, it can be beneficial to register for VAT - even if you're not required to. This is the most common VAT scheme for smaller businesses with some that have an annual filing scheme this is reserved for larger companies but can still mean monthly and quarterly filing.

This is covered below but isn't a common requirement for the large majority of businesses in the UK. With quarterly VAT filing, this means that you'll need to make sure you're on top of your accounting admin at the end of each VAT quarter end to ensure you file and pay the right amount of VAT. You'll find that you'll fall into one of three groups for your VAT quarter end and filing period:. Businesses with a turnover below the threshold have the option of signing up for MTD voluntarily.

A classic example is business entertaining. You simply have to take the full cost on the chin. You don't reclaim input VAT except on large capital assets. You can find out more in our guide to using the Flat Rate Scheme.

In some cases you may wish to register before you reach the threshold, in order to claim back VAT on costs, for example. However, remember that if your business's current and prospective customers are the general public, you may decide not to register for VAT until you have to, because if you charge VAT to a customer who isn't registered for VAT, they can't claim it back.

This customer might feel your prices have increased. As a result, this gardener may struggle to win business against a competitor who isn't registered for VAT. Using the relevant information from the bills, expenses and bank transactions that you enter as you run your business, FreeAgent automatically generates your VAT return ready for submission to HMRC.

When you buy a product that is eligible for VAT in a shop, for example, VAT is automatically included in the price you pay. In recent years the UK government has introduced temporary measures to reduce the rate of VAT paid in certain business sectors, such as hospitality.

Well, no. The sector includes food outlets, providers of accommodation such as hotels and guest houses, and attractions such as cinemas and theme parks. It will then rise to No other changes are being made to VAT.

There's a common misconception that only limited companies can register for VAT. Regardless of your business structure, you can choose to voluntarily register whenever you like, but there comes a point when legally you must register. If you know your turnover will reach the threshold soon, you should allow enough time to register. If you fail to notify HMRC in time, you may be liable to pay a penalty! There are some situations in which it may be beneficial to voluntarily register for VAT before you reach the threshold, we cover voluntary VAT registration later in this article.

When your turnover reaches the VAT threshold in a rolling 12 month period, you must start charging VAT from the first day of the second month after you exceed the threshold. When you expect to exceed the threshold in a single day period, you must start charging VAT immediately.

Recharges are costs that your business incurs when supplying goods and services which you pass on to your customers.

A good example is a train ticket, which is not subject to VAT rules. However, if you pass the cost on to your client and include it on a sales invoice, you need to add VAT. This situation is quite different to your client reimbursing expenses at cost.