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 Value Added Tax, (VAT).
Registration.

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You can start trading but you cannot charge or claim VAT unless you are VAT registered.

The official main reference guide to Value Added Tax ( "The VAT Guide" HMCE Reference:Notice 700) is available to download from the Customs and Excise web site.

What is VAT?

Value Added Tax (VAT) is a tax businesses charge when they supply their goods and services in the United Kingdom or Isle of Man.

It is also charged on goods, and some services, that are imported from places outside the European Community (EC) and on goods and services coming into the UK from another EC Member State.

The following are examples of business supplies:
• selling new and used goods, including hire purchase;
• providing a service, for example, hairdressing and decorating;
• charging an admission price to go into buildings; or
• self-employed people providing supplies, e.g some salesmen and subcontractors.

Qualification criteria.

The following three factors play a part in determining whether or not you need to register :

• Taxable Supplies
The supply of any goods and services which are subject to VAT at any rate, including zero-rated, are called taxable supplies. (Exempt supplies are explained below)

• Distance Sales
Distance selling is when a taxable person in one European Community (EC) Member State supplies and delivers goods to a customer in another EC Member State and the customer is not: registered for VAT, or liable to be registered for VAT. The most common example of distance sales is mail order sales.

• Acquisitions
If you are an organisation or business, and not a private individual acting in a purely personal capacity, any goods you buy from a VAT registered supplier in another EC country for removal to the UK are known as acquisitions.

If:

• Your taxable supplies, distance sales, or acquisitions are expected to exceed £70,000 in the next 30 days, or if you are already trading, and they have exceeded £70,000 in the past 12 months...
• Or, if you have taken over a VAT registered business as a going concern...

Then:

You must notify your Customs and Excise local VAT office immediately of liability to register for VAT. (See VAT Forms & Where do I send my forms? Or register online.)

If:

Your taxable supplies, distance sales, or acquisitions are not expected to exceed £70,000 in the next 30 days, and have not exceeded £70,000 in the past 12 months...

Then:

VAT registration is not necessary in these circumstances although businesses can register for VAT on a voluntary basis to be able to reclaim VAT on purchases. Anyone who registers will also have to account for tax on their sales, where appropriate. Apply to your local VAT office on form VAT1 or register online.

Different Rates of VAT

There are three rates:

Rate of VAT

Also known as...

Applies to taxable supplies of ...

17.5%

standard rate

most goods and services

5%

reduced rate

examples: fuel and power used in the home and by charities, renovation and alteration of dwellings, women's sanitary products

0%

zero rate

certain goods and services on which you do not need to charge VAT (examples below)

Zero-rated supplies

These are taxable supplies on which the current VAT rate is 0%.

Examples include:
• most food (but not meals in restaurants or cafes and hot take-away food and drink);
• books;
• newspapers;
• young children's clothing and shoes;
• exported goods (For further information see Notice 703 Exports and removals of goods from the UK.);
• most prescriptions dispensed to a patient by a registered pharmacist;
• and most public transport services.

This list is not exhaustive and further information regarding zero-rated supplies can be found in the Customs and Excise's Notice 700 The VAT Guide. If all or most of your supplies are zero-rated, you may not need to be registered for VAT. This is called exemption from registration (See more info exemption in Notice 700/1
"Should I be registered for VAT?"
and its supplements).

See more info on what is VATable on the HM Customs and Excise web site

Exempt supplies

Exempt supplies are business supplies other than taxable supplies on which VAT is not charged.

Examples include:
• selling, leasing and letting land and buildings (but not lettings of garages, parking spaces or hotel and holiday accommodation). See Notice 742 Land and property;
• insurance;
• betting, gambling and lotteries (but not takings from fruit machines);
• providing credit;
• certain education and training;
• fund raising events by charities;
• subscriptions to certain membership organisations;
• the services of doctors and dentists;
• and certain services from undertakers.

This list is not exhaustive and further information regarding exempt supplies can be found in the Customs and Excise's Notice 700 The VAT Guide.

If you are registered for VAT and make some exempt supplies, you may not be able to get all your input tax back. Notice 706 Partial exemption tells you more about this.

If all your supplies are exempt, you will not be able to register for VAT. However if you make supplies of finance or insurance services or of investment gold to customers in countries outside the European Community, you may register on a voluntary basis, in order to claim back any input tax you have paid in respect of these specified supplies. You are also able to recover input tax where your supply consists of insurance and finance services (including intermediary services) that are directly linked to the export of goods from within the EC to outside the EC, regardless of where the recipient of the supply is established. If you are making this type of supply and think you might be able to register, you should contact HM Customs and Excise for further advice.

VAT and International Trade

See the HM Revenue and Customs website for further information on VAT and international trade. It covers infomation on how ' the place of supply' and business status of your customer/supplier can affect the VAT rules that apply to you.

VAT on Internet / Electronic Services

The HM Revenue and Customs website has detailed information on the special arrangements for charging VAT on supplying electronic services internationally.

For further details:

VAT Healthcheck - Consultancy service focused on helping businesses make potential VAT savings and gain peace of mind.
List of local VAT offices
• HM Revenue & Customs Web site: http://www.hmce.gov.uk
• National Advice Service Tel: 0845 010 9000
• If you need to refresh your maths skills, see how to add and deduct VAT.
• Read the "beginner's guide to working for myself/ setting up a business" which contains further information about starting up in business.

UK VAT CHANGES 2008-2010

Standard VAT was at a reduced rate of 15% from December 1st 2008 to Jan 1st 2010

  • Only standard-rated sales were affected.
  • For any sales of standard-rated goods or services that took place on or after 1 December 2008 providers should have charged VAT at the rate of 15%.
  • The 15% rate remained until 31st December 2009, and from 1 January 2010 it reverted to 17.5%.

See:
HMRC Details of the Measure

Pre Budget Report Nov 24th 2008 VAT reduction to 15%


Any Questions?

Customs and Excise provide answers to frequently asked questions (FAQ's) on their website:

A beginner's guide for businesses new to VAT.
For businesses new to VAT:

What is VAT?

Do I have to register for VAT?

What is taxable turnover?

What are input tax and output tax?

Why would I want to register for VAT if my taxable turnover is below the threshold?

What are the exceptions?

What if all my goods are zero-rated?

I'm a small business - is there anything that will make VAT simpler?

Where can I find more detailed information online or in print?

Can I speak to someone for more help?

Managing your VAT
How to get VAT accounting right and avoid the common pitfalls:

How can I contact Customs for advice?

Will VAT impact on my growing business turnover?

How can I register for VAT, and make the process as simple as possible?

How should I keep my books up-to-date and check accounting documents?

What should I do if there's something I don't understand?

What should I do when I contact Customs?

How should I manage the VAT within my business cashflow?

Will Customs contact me?

What if, at the end of the day, I'm not happy with Customs should I complain?

VAT payment problems.
Problems paying your VAT? Some key questions answered.

I have received a demand notice for payment of tax. Why?

I am not able to pay the debt immediately because of a temporary Cash Flow problem. What should I do?

I have consulted the bank/financial advisor but they are unable to help. What else can I do?

What is the Default Surcharge?

When will surcharge be issued?

How much is it?

What sort of assessments are sent out?

Public and Travel.
Covers common questions from travellers and those working or living abroad:

What goods can I bring back from the EU?

What do I need to know about postal imports and gifts?

I want to buy goods over the internet - what do I need to know?

What do I need to know about buying a car from another EC country?

What do I need to know about importing a car or other personal effects from outside the EU?

How do I claim a VAT refund when I leave the UK?

How do I find Customs on departure?

What is the United Kingdom (UK) Value Added Tax Rate?

Can I claim a tax refund on services if I am in the UK on business?

Trading on the Internet.
VAT treatment for electronically supplied services (e-commerce):

Where can I find out about the changes in VAT treatment of e-commerce supplies from 1 July 2003?

Is a hard copy version of this E-commerce guidance available?

Is VAT chargeable on free downloads of digitised products?

Some of the supplies of printed matter that I make are zero-rated for VAT. These include books, magazines and leaflets. Would the zero-rating still apply if I sold digitised versions of these products?

So will I need to charge UK VAT on these digitised product supplies to ALL my customers, world-wide?

Completing your EC Sales Lists.
Information for people needing to submit EC Sales list returns:

If I am sending the goods to a customer in one EC country but a trader in another EC country pays the invoice, which customer do I put on the ESL?

I only sell books, which are zero-rated, so do I have to enter these sales on an ESL?

I only supply services to EC customers, do I need to complete an ESL?

I sell to Norway. Is it in the EC?

Can I submit my ESLs electronically (ie by EDI)?

Can I submit my ESLs in plain paper format from my computer?

What do I do if I do not receive my ESL form?

Can I submit EC sales values in Euros?

If I use the VAT Cash Accounting Scheme, should I declare only payments received during a calendar quarter or should I declare transactions at the point the invoice is raised?

VAT for people with disabilities.
Answers to common questions on VAT rules for people with disabilities:

What is the definition of disability in this context?

Are people with disabilities automatically exempted from VAT?

Why can't everything supplied to disabled persons be relieved from VAT?

What goods can be relieved from VAT when supplied to people with disabilities?

What services can be relieved from VAT when supplied to people with disabilities?

What if I hire or lease goods?

What evidence is required to justify the zero-rating of these goods and services?

What about charities?

Where can I get more information?

Charities and VAT.
Answers to common questions on charities and VAT:

Are charities automatically exempted from VAT?

Does this mean that charities will be charged VAT on everything they buy?

When charities are charged VAT, can they reclaim it?

What are the rules governing charities and VAT registration?

What is the definition of 'business' in this context?

What are taxable supplies?

There appears to be more than one rate of VAT

How does the VAT system work in practice?

What are exempt supplies?

Where can I get more information?

ECSL (EC Sales List) - Electronic submission.
Frequently asked questions on the submission of EC Sales List by electronic means:

What are the technical requirements for operating the service?

Can any business access the EC Sales List (ECSL)?

I make use of the Non Established Taxable Persons Scheme based in Aberdeen. Can I use the ECSL?

National Insolvency Unit.
Questions and Answers about the National Insolvency Unit:

What is the Level for Crown Set-off?

Which Government departments do we offer credits to?

Who dose CSL Management Group represent?

How long dose it take to process a repayment?



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