Welcome to Point Accountancy's VAT page, we can assist you in compiling and submitting your vat returns (which are due for every VAT registered company in the UK quarterly), from our head office in Loughton Essex or we can come to you if this is easier.
The current threshold for VAT is set by HM Revenue and Customs at £83,000 at which point it is compulsory to register for VAT although you can register voluntarily if you require.
Standard VAT - With the standard rate of vat you will charge 20% to your customers in top of the total invoice value unless you make zero rated sales which could include cold food sales or insurance products plus many more.
Using the Standard rate of VAT Point Accountancy will assist you with claiming back all of the expenses that are certified by HMRC and are claimable to ensure that you have no issues in the future.
An example of how the standard rate of VAT works is shown below:
Mr A sells and fits a kitchen to Mr B for £15,000 + VAT, in doing this his claimable purchases were £5,000 + VAT therefore the calculation for this job that Mr A is liable to pay HMRC is:
Sales - £15,000 + £3,000 VAT
Purchases - £5,000 + £1,000 VAT
Therefore the profit for this job would be £10,000 + £2,000 VAT meaning that the £2,000 would be the amount of VAT due to HMRC prior to Mr A calculating his indirect business expenses.
Flat Rate VAT: Flat rate VAT is a scheme that HMRC set up to assist businesses with low vatable purchases to simplify the process of VAT returns with HMRC deducting 1% from the stated rate in the first year registered for the scheme. With the Flat Rate Scheme Point Accountancy will calculate which business category you will fall into and will advise you of its rate as with the standard rate of vat you will charge 20% to your customers in top of the total invoice value unless you make zero rated sales although the difference comes when claiming your purchases where you cannot claim any standard purchases you can only claim certain capital expenditures.
An example of how the flat rate scheme works is shown below using a consultancy business as an example.
With a consultant the business costs are reasonably low therefore the business may be in danger of falling in to the HMRC standard rate of 16.5% which is applied when the business purchases are less than 2% of the annual turnover or less that £1,000 whichever is the higher, for the purposes of this example we will estimate that the purchases are above the minimum threshold.
Mr G sells a service to Mr H for the duration of 3 months and for the value of £15,000 + VAT he cannot claim back any VAT therefore the calculation of the VAT payable would be as below:
Sales - £15,000 + £3,000 VAT - £18,000
With the Flat rate scheme the total invoice value is used to calculate the amount payable therefore in this case a consultant's rate for this scheme is 14.5% or 13.5% in the first year therefore the calculations are shown below:
In the first year of trading the calculation would be as follows - £18,000 x 13.5% = £2,430 payable
In each subsequent year of trading the calculation would be as follows - £18,000 x 14.5% = £2,610 payable
This means that in the first year of trading the supplier in this case Mr G would effectively make £570 from registering for the scheme with him making £390 in the subsequent years.
Although these examples are informative we would recommend contacting us as we can calculate all of these accurately to ensure you do not have any issues in the future.