Best Option

Find the right accountancy solution for your requirements

As you may know, Value Added Tax (VAT) is added onto nearly every purchase anyone makes in the UK – whether you’re buying a bottle of wine from the supermarket or a new laptop, you’ll be paying VAT.

A business making less than £79,000 annually does not have to register for VAT. This means as a small company with a small turnover your products and services might be less than a VAT registered competitor.

If you are VAT registered you’ll need to complete a return each quarter. When you complete your VAT return you tell HM Revenue and Customs how much VAT you have charged and how much you have paid. HM Revenue and Customs are hoping you’ll charge more than you pay and will need to make a payment to them.

Basically, if you are buying lots of stock or goods to run your company that have VAT added or are over the threshold of £68,000 it’s probably best to register. However if you don’t, it’s probably not worth the hassle and administration.

Special note: There could still be a very good reason to register for VAT even if you don’t meet the threshold or buy lots of goods – some people believe having a VAT number adds a certain credibility and prestige to their company, also some clients will only work with other VAT registered suppliers. Bear this in mind when making your decision. If you still can’t make your mind up you can always call us and we’ll be more than happy to help.

The Flat Rate VAT Scheme

Instead of registering for the standard VAT scheme (outlined above), it may be more beneficial for you to register for the Flat Rate VAT scheme.

Within this scheme, you charge your clients at the standard rate and pay the government at a lower rate of the gross amount. Different sectors have different rates (call us to find out what rate you might be in).

Find below an example for an IT company whose flat rate is 12% in their first year (new companies get a 1% first year discount):

Amount you invoiced –                      £50,000 plus VAT £8,750
Total amount received –                   £58,750
VAT paid to HMRC –                          £58,750 * 12% = £7,050
(flat rate example of 12%)

The difference between the VAT invoiced (£8,750) and the flat rate paid back to HMRC (£7,050) is yours to keep as profit!

£8,750 – £7,050 = £1,700

You’ll need to speak to an accountant before you decide which scheme is best for you. They’ll be able to work out the most tax efficient way to pay VAT.

How to register for VAT

There are two ways to register for VAT:

1. Online – visit HMRC’s website.
2. Post – you can get the relevant written forms from your accountant

Registering online is much simpler and means that you won’t need to change your VAT process in the future. Get the advice of an accountant before you register.

Need help finding the right accountancy solution for your requirements?

Answer the questions below for our recommendation.

Do you: (select the first that applies)
Please select an option