What is VAT?

VAT stands for Value Added Tax. It's a tax added to goods and services at each stage of production or distribution where value is added. A business typically needs to register for VAT when its taxable turnover (the total sales that aren't exempt from VAT) reaches the VAT registration threshold set by the government. The VAT threshold is currently £90,000, and this is calculated over a rolling 12-month period, not necessarily aligned with your accounting periods.

How does VAT work?

Once registered for VAT, you will need to apply VAT to all applicable sales. The standard rate for VAT in the UK is 20%. This VAT money must be set aside and paid to HMRC at the end of your VAT period. If you also receive VATable supplies, then you will be able to claim the VAT back on these purchases. This means you will likely pay less than 20% over to HMRC and, in some cases, you might even be due a rebate.

How can a bookkeeper help with VAT?

A bookkeeper can assist in recording and tracking VAT transactions accurately. They ensure that VAT is correctly calculated, collected, and paid on time, helping businesses avoid penalties and comply with tax laws. Additionally, they can help you understand and navigate the complexities of VAT, ensuring you maximise your VAT claims and stay compliant with all relevant regulations.

Navigating VAT Complexities

There is a lot to know and learn about VAT rules, from different types of VAT rates, such as zero-rated and exempt, to reverse charges. There are also various rules about when you can and can't claim that 20% VAT, such as when entertaining clients. At Clear Bookkeeping Ltd, we can help with all of this, ensuring you stay compliant and claim everything you are entitled to.