Value Added Tax (VAT) can be a complicated subject, thankfully the Gorilla Accounting team is here to worry about that. Here are the basic principles of VAT that you should be aware of.
Your company must register for VAT if its sales are more than £82,000 in a 12 month period. However you can also voluntarily register for VAT if your sales are below this level.
If you reach the turnover threshold and you fail to register your company, HMRC can levy penalties against the business. Once you are VAT Registered you must add an additional 20% onto your sales invoices – this isn’t additional sales but tax you will collect on behalf of HMRC (Output VAT). When your company pays for something, it may be charged VAT on these purchases (Input VAT).
Please note: not every purchase will be subject to VAT.
Once a quarter Gorilla Accounting will calculate Output VAT - Input VAT to determine a VAT liability. This is reported to HMRC on a VAT Return and any amount due is paid to HMRC. At Gorilla Accounting, we often recommend our clients voluntarily register for VAT, even when turnover is below the threshold. By registering immediately, you will have access to the advantages of Flat Rate Scheme for VAT.
The Gorilla Accounting team prepare VAT Returns on behalf of clients, all you are required to do is to submit through FreeAgent and pay any amount due to HMRC each quarter. This can even be arranged to be paid via direct debit.