Our top VAT tips

Our top VAT tips

Whether you are a seasoned pro or a tax ‘newbie’, VAT can cause headaches for business owners. From VAT schemes and registration to Making Tax Digital and exempt goods and services, VAT can cause even the most experienced entrepreneur to slip up from time to time.

So, what’s the deal with VAT? In this blog, we’ll answer some of the most common questions we hear from business owners just like you.

When do you need to register for VAT?

A business must register for VAT when its taxable turnover exceeds £85,000 in any consecutive 12-month period, or if you expect it to exceed £85,000 in the next 30 days.

Remember, your VAT taxable turnover is the total of everything sold that is not VAT exempt. You would also include any services purchased from non-UK suppliers under the VAT Reverse Charge scheme.

There are also opportunities to voluntarily register for VAT. We’ve explained why this might be a good idea below.

What are VAT accounting schemes?

There are several VAT accounting schemes available, each designed to simplify the tax regime (see, even HMRC knows it’s complicated!).

The most common schemes are as follows:

• VAT Cash Accounting (taxable turnover of £1.35 million or less)
VAT is paid when it is actually received, rather than when it is invoiced.

• Flat Rate VAT Accounting (taxable turnover of £150,000 or less)
VAT is calculated as a percentage of gross turnover and special rates are set per industry.

• Retail and VAT margin schemes
Simplified VAT schemes specific to the retail and other niche sectors.

How do I register for VAT?

Most businesses can register for VAT online by following this link. Your accountant or agent can also sign up on your behalf.

Some businesses must register by post. Find more on this here.

What are the advantages and disadvantages of registering for VAT?

If your business turnover is less than the VAT threshold, you may wish to register voluntarily.

Why? A VAT-registered business can give the appearance of a large established company. This could have benefits both domestically and internationally. Registering for VAT will also allow you to reclaim the cost of VAT on certain goods and services.

The primary drawback, however, is the additional accounting and administration burden. Most VAT-registered businesses must submit quarterly returns and if turnover is above £85,000 they must use digital software, which may be outside the realms of their skillset or resources.

Before registering for VAT, it is always best to first seek advice from a professional.

If taxable turnover is more than £85,000, you don’t have the luxury of choosing whether you want to sign up or not. However, you can choose to enrol in a VAT accounting scheme, which may simplify and reduce the burden of reporting VAT. Again, it’s best to seek expert advice before registering for a scheme.

What does Making Tax Digital (MTD) mean for my business?

Under the new digital tax regime, almost all VAT-registered businesses with taxable turnover above the VAT threshold (currently £85,000) need to keep their records digitally and submit their VAT returns using MTD-compatible software.

To your business, this may mean investing in a software package and training staff to use it.

To find compatible software, click here.

How much VAT should I charge?

There are three different rates of VAT, which explains why things can get so complicated. These are the standard rate (20%), reduced rate (5%) and zero rate. The standard rate is charged on most goods and services, while the reduced and zero rate is charged on special goods and services. A full list of reduced or zero-rated goods and services can be found here.

Meanwhile, some goods and services are classified as VAT-exempt, meaning no VAT is charged and they are not counted in your VAT-taxable turnover.

This means that if your business only sells VAT-exempt goods, it cannot register for VAT – even if its turnover is above the £85,000 threshold.

Want to know more about VAT? Get in touch with our team now.

What happens if I want to use cloud accounting?

What happens if I want to use cloud accounting software?

With the Government’s flagship Making Tax Digital (MTD) regime now in place, more and more businesses are looking at cloud accounting software to help them get to grips with managing their tax and financial information online.

If your business is VAT-registered and you have an annual turnover of £85,000 or more, you are now required to submit quarterly digital VAT returns to HM Revenue & Customs (HMRC). Most businesses are using cloud-based software to do this.

Since the introduction of MTD, businesses now need to ensure that all of their relevant tax and financial information has been migrated online via an MTD-friendly software package, which will enable them to communicate with HMRC when it comes to submitting tax information.

Other forms of taxation, such as Income Tax and Corporation Tax, are now expected to follow on from the requirements for VAT from April 2021 at the earliest.

The multiple benefits of cloud accounting software

Connect from anywhere

Connect anytime, anywhere, and on any device.

Total transparency

Check what’s come in, and what’s gone out with real-time updates on invoices and outgoings.

Collaborate in real-time

Work, create, and share in real-time with colleagues or an expert at Rotherham Taylor.

Smart and organised

Easy-to-use online dashboards keep your records, invoices, bills and reports in one secure location.

Security is a number one priority

Bank-level security and 24/7 customer support from the software provider.

Software that suits you

We only use software that suits you. We can advise on the most suitable software based on your needs and preferences.

How can Rotherham Taylor help?

If you need help with cloud accounting software, look no further. At Rotherham Taylor, our team can help you to choose the right cloud accounting software package to suit your business and we can also support you with the transition to MTD.

What happens if my business requires financing?

If your business needs finance, it can be difficult to know which option is the correct one for you.

Being able to access the right sort of finance can help your business grow, develop and thrive. There are a range of methods to choose from when raising finance, including bank loans, equity investment and debt finance.

Bank loans are an obvious one, but equity investment and debt finance are more specific to the type of business. If it is considered a ‘riskier’ venture, then equity investment could be more suitable, while business angels are prepared to back new businesses with equity finance.

There is also the advantage of the Government allowing tax relief to investors in new businesses.

For a business that is considered lower risk, debt finance is one possibility.

Start-up loans are also available for new businesses, whilst peer-to-peer lending and crowdfunding are alternatives to high street bank lending.

When you want to grow your business, there are a range of choices, and it’s important to know what your goals are. Financing options include;

  • Seed Financing
  • Venture capitalists
  • Bond
  • Peer-to-Peer lending/loan
  • Equity crowdfunding
  • Trade finance
  • Export finance
  • Private finance
  • IPO/public offering
  • Corporate venture finance

Knowing which is the correct route for your business can be difficult, but considerations about how much financing you need, what it is for, how long the period of borrowing will be, what the shareholder’s positions are and what tax implications there are can all inform the decision.

SME’s represent over 60 per cent of the private sector workforce, and at Rotherham Taylor, we know that corporate finance advice and transaction support is pivotal.

We offer support to a range of businesses, from small and medium owner-managed businesses to listed companies, so if you need support on financing your business, contact us today.