VAT Advice Edinburgh
Allsquare Accountants Edinburgh are a specialist firm of VAT consultants to assist you to understand all things VAT
VAT can be a headache for a business – but it needn’t be, and a good accountancy firm that is close to its customers, can help resolve a lot of questions, and prevent them turning into problems.
VAT is present on many of the supplies that a business needs to use. Because these things are being put into the business the VAT you paid on them is called “Input VAT” and you’ll see a box for this on the online VAT return form.
Once the business has registered for VAT, it can deduct the input VAT, making its expenses lower. Once registered, the business must charge VAT on the goods and services it sells. Because that VAT is charged on invoices being put out by the business, it’s called “Output VAT”.
Every quarter, the business adds up all the VAT it has paid on the supplies to run the business, and all the VAT it has charged its customers, and offsets the VAT paid against the VAT charged. The balance after this is owed to Her Majesty’s Revenue and Customs (HMRC).
Any business can register for VAT, and businesses that are earning over £83,000 currently, are obliged to register. You must not charge VAT until you get your formal registration number from HMRC, and that number should go on each invoice or receipt you issue. Some accountants run systems that will do most of this work for you, so if you are a sole trader, without a bookkeeper, it may be easier to use this kind of service.
There is still a question – if my business is below the threshold, should I register? For some people, the fact that they don’t have to charge VAT is a business advantage because it makes them cheaper than larger firms. This is a key factor if you are charging the general public, who cannot reclaim the VAT, and so some businesses advertise this fact.
But be careful – this is a very complex area, and it is easy to get tripped up by the rules. And remember that although you add 20% to an invoice when charging VAT, you don’t deduct 20% when reclaiming VAT – a common mistake made by small businesses. If you find this confusing, seek the help of an accountancy firm with systems that will work it out for you.
There is a VAT flat rate scheme, through which you can agree to reclaim the average for your industry, trade or profession. If you are a sole trader it may be easier to go for this scheme, because it cuts out a lot of paperwork each quarter.
There are also numerous concessions, exceptions, regulations and so on. It can feel like a bit of a minefield until you become familiar with what you can and can’t claim in your business area, so again, think about getting friendly advice from an accountant unless you are truly knowledgeable.