Starting up:
VAT
When you start up your business you need to think about VAT (Value Added Tax).
Once your turnover reaches a certain level, you will need to register for VAT. You could decide to register voluntarily when you set up, and many businesses find this advantageous.
Should I be registered for VAT
There are some special schemes that are available to smaller businesses, which could simplify your VAT accounting.
Should I register for a VAT accounting scheme?
Once you are registered for VAT you should charge VAT on your sales (output tax) and you will be able to reclaim VAT on your purchases (input tax). If your output tax exceeds your input tax, you need to pay the difference to HM Revenue & Customs, and you will get a refund if it is your input tax that is the greater.
You account for the VAT on your VAT return. Usually these need to be prepared quarterly, but you can ask to prepare them monthly, which might be beneficial if you regularly receive repayments. The VAT return and any payment should be submitted within a month of the end of the VAT period.
If you are late paying your VAT you may be charged a penalty, calculated as a percentage of the late VAT. The percentage increases the more times you are late, and so you should always aim to pay VAT on time.
VAT can be a very complex area. We have covered more points in our Running a business section.
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Where next?
Within Starting up ...- Developing your business idea
- Your business structure
- Setting up
- Accounting systems
- Payroll and PAYE
- National Insurance contributions
- Income tax
- Corporation tax
- Contact us about this issue
- Read about how we can help you & your family
- Request a meeting with us
