There are numerous implications and considerations when it comes to VAT for new businesses, from deciding if and when to register to what records you need to keep.

Can I, or should I, register for VAT?

VAT registration is compulsory in the following circumstances:

  • If taxable supplies exceed £85,000 (1 April 2016) in the last 12 months; or
  • If expected taxable supplies in next 30 days alone exceed £85,000.

It is also possible to voluntarily VAT register if your turnover is below these limits as long as you are either:

  • Engaging in an economic activity; or
  • There is an intention to make taxable supplies in the future.

Will VAT registration depend on what my income is?

Yes, if your taxable supplies exceed £85,000 you must register for VAT with HMRC. Taxable supplies includes standard-rated, reduced-rated and zero-rated supplies. Exempt supplies are not included; this includes certain land and property transactions and financial services. (See our VAT rates guide for more information.) You can, however, voluntarily VAT register regardless of your current turnover level.

Once I am registered what deadlines do I need to be aware of?

You will be required to submit VAT returns to HMRC on a quarterly basis. You will have 1 month and 7 days to submit this return and pay any VAT due to HMRC.

What other paperwork do I need to think of?

You must retain all invoices you raise and pay to allow you to complete your VAT return. All VAT invoices raised by your business must hold specific information to meet specific requirements such as your customer’s name and address, your name, address, VAT number, the tax point, details of the supply being made and the Net and VAT amounts being charged. In addition a VAT account should be maintained. All records should be kept for six years.

VAT for new businesses – specific help

There’s a lot to take into account when you’re deciding the best way to handle VAT as a new or small business, and the above is a general guide – but it’s important to find what works for you and you alone. If you want the right approach for you, your business and your plans for growth, get in touch and we’d be happy to advise.

 

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If you’re a new or small business, there are three schemes under which you might be able to simplify your VAT returns.

Flat Rate Scheme

HMRC designed this scheme to simplify VAT accounting. Under it:

  • You pay VAT as a single fixed percentage applied to gross turnover;
  • There is simplified book-keeping and calculations;
  • In some cases, it can mean you owe less VAT to HMRC;
  • You get a 1% discount in the first year of using the scheme;
  • The threshold for entry into the scheme is revenue up to £150,000.

Cash Accounting Scheme

This scheme means that small businesses can defer payments on the VAT they owe:

  • You only pay output tax when you’ve received the input payment;
  • You don’t have to formally apply to join the scheme – you can start without notifying HMRC;
  • The threshold for entry into this scheme is revenue up to £1.35m.

Annual Accounting Scheme

HMRC designed this scheme to reduce the amount of admin that small businesses have to undertake:

  • You only have to submit one VAT Return per year;
  • Fixed interim payments are made with annual balancing payment;
  • You get an extra month to submit your VAT Return and pay the tax you owe;
  • It can help with your cashflow if the installments are smaller than your quarterly payments;
  • The threshold for entry into this scheme is revenue up to £1.35m.

For more information on any of these schemes, and help with your VAT Returns, contact Iain Masterton on 0131 5585800.

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