VAT Guide

15th April 2015

What is VAT and how does it affect my business?

VAT can appear to be quite daunting but for the majority of businesses it doesn’t have to be. Let’s take a look at the basics and if you still have any questions you can get in touch.

What is VAT?

Value Added Tax (VAT) is basically a tax on consumer spending. The government collects this tax through the businesses that supply the good and services.

VAT registered businesses charge their customers VAT (known as Output VAT) by adding it to the sales price of those goods and services.

However as a VAT registered business you can also reclaim any VAT (known as Input VAT) that you pay to your suppliers.

Most businesses collect more VAT from their customers than they pay to their suppliers so in effect they end up with a surplus that they must then pay over to HMRC.

VAT rates

The VAT charged depends on what category the goods or service fall into. There are 4 different categories:


For a comprehensive guides to VAT rates head over to HMRC

Do you need to be registered?

You only need to register when you go over the threshold of £81,000

There are some circumstances where you may choose to register voluntarily such as:

1)       You sell zero rated products

2)       You only work with VAT registered businesses

3)       Appearances – you want your business to appear a bit bigger than it is

If you do not register for VAT immediately it’s very important to keep an eye on your turnover, the threshold for VAT is based on a rolling 12 month period so you need to always look at the current month and the previous 11 months. If your monthly turnover goes over £6,500 in any month you will need to keep an eye on this.

How to register

Once you go over the VAT threshold you have 30 days in which to register for VAT.

To complete the registration you will need:

  •          Your company Registration Number
  •          The date of incorporation of the company
  •          Your National Insurance number
  •          Your estimated turnover for the next 12 months
  •          Details of businesses you’ve been associated with in the last 2 yrs

You can register online or you can take advantage of our start up package to help with this.

If you register online you should get you VAT number within 3 days.

Keeping Records

Once you are VAT registered it is very important that you keep records of your income and expenditure that show the VAT you have charged or incurred. You can keep these electronically but you must keep them for 6 years.

IMPORTANT NOTE – You can’t reclaim VAT using a pro-forma invoice, statement or a delivery note, it must be a valid VAT invoice.

A quick tip here is that card payment slips are not valid for VAT purposes so make sure you get the actual receipt, in a lot of shops you will need to ask for this. See the example below:


If you are worried about keeping records remember that you can snap a quick picture on your smart phone or take a look at Receipt Bank. We use Receipt Bank with all of our bookkeeping clients as it creates a database of the receipts for future reference.

Filing your VAT return and paying HMRC

VAT returns are normally completed on a quarterly basis, we recommend using Xero accounting software for your business and running a VAT return is then very straight forward. You can even file it with HMRC from within the software.

The deadline for filing your return and paying VAT is the one month and 7 days after the end of the quarter. HMRC has a VAT payment deadline calculator to cover different payment methods.

If you are paying by online banking the details are:

HMRC VAT | 11963155 | 08-32-00  and you should use your VAT registration number as the reference.

If you have any questions about VAT why not contact us and have a chat about how we can help you get the administrative stuff under control and focus on your business growth.