Value Added Tax

IAIN BETHUNE CA FCMA

Value Added Tax is the most extensive indirect tax and has been with us for thirty years.

Understanding and complying with the legislation can be a complicated business.

If your turnover over the past 12 months is £58,000 or more then you must register for VAT purposes with Customs & Excise provided your business supplies chargeable goods or services.

Should your turnover be less than £ 58,000 per annum you may register on a voluntary basis provided that you have a bona fide business.

Under the normal scheme the trader accounts for value added tax on the basis of invoices issued and received .Where turnover is anticipated to be £ 350,000 or less over the next 12 months the trader can elect to operate the cash accounting scheme. This enables the trader to account for value added tax on the basis of payments made and received. Some businesses will not benefit from the cash accounting scheme.

Normally VAT returns are made quarterly but if you are up to date with your returns and your annual turnover is £300,000 or less, you may elect for an annual accounting scheme.

Where annual turnover less than £ 100,000 :

Quarterly payments each equal to 20% of the previous year's net liability. The balance of any VAT due is payable two months after the year end at which time the annual VAT return is lodged.

Where annual turnover is between £ 100,000 and £ 300,000 :

Nine monthly payments ,each equal to 10% of the previous year's net liability, beginning on the last day of the fourth month of the VAT year. Again, any balance due is payable two months after the year end at which time the VAT return is submitted.

Optional flat rate scheme

Since April 2002 small businesses may choose the new flat rate scheme instead of the normal method of recording VAT inputs and outputs. Not all types of businesses are covered and different types of businesses have differing flat rates of VAT applied.

Please contact us if you would like to learn more about this and to see if it is really beneficial to your business.

There are free fact sheets available from us on VAT :

An Introduction to Value Added Tax
VAT - How to Survive the Enforcement Powers.
Recovering VAT on Staff Expenses.

Customs & Excise are responsible for the collection of Value Added Tax and they have considerable authority to investigate in depth.

In our experience inspection visits by Customs & Excise very rarely fail to find any errors or omissions.

We offer an audit of your recording systems to ensure that your procedures are sufficient to record all transactions correctly under current Value Added Tax regulations and that your VAT returns based upon these are properly completed.

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