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VAT guide for your business


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When your business reaches the stage where it has to start paying Value Added Tax (VAT), it can be quite complicated to understand. Your business needs to earn a set sum of money before it has to start paying VAT.

Unlike other types of tax, this one is collected by registered businesses on behalf of the HMRC. You will need to start charging VAT on any products or services you offer, which can be particularly tricky if you’re selling products abroad.

Different VAT rates

As it stands, there are three different VAT rates. These include:

  • The standard rate of 20%
  • Reduced rate of 5%
  • Zero rates

You will automatically be assigned to a specific scheme when you become VAT registered. It’s worth noting that there are other schemes available, so you should look into your different options to see which one best suits your business. You may not have been placed on the best one to suit your individual needs.

Filing a VAT return

Filing tax returns is one of the worst jobs for a business. Usually you have the choice of whether to file your tax return online or via the post, but with VAT returns they have to be done online. This means you’ll need a VAT online account and a Government Gateway account will be created.

Complying with VAT

VAT and your businessIt’s essential that you keep all VAT records for a minimum of six years. You can choose whether you want to keep them electronically, on paper or using software. They need to be readable and accurate. It’s worth noting that if you’ve somehow lost a VAT invoice, you cannot use a photocopy. You’ll actually need to request a duplicate from the company.

Keep separate records which show what you charge on VAT and how much your business actually pays for VAT.

Understand VAT inspections

Occasionally the tax man may question your VAT returns. This means they will want to investigate further to check you’re paying the right amount. They could visit your business premises or ask you to attend a meeting.

Before they visit you, the HMRC will usually ask you for copies of your accounts. If they still want to investigate further, you’ll be given seven days’ notice before they actually show up at your place of work.  They will also tell you in advance what they will need to see when they get there. This gives you chance to prepare and make sure everything is in order.

It’s vital that you keep your VAT records up to date as not having the correct information could result in quite high fines. It helps to keep on top of VAT invoices as and when they come in, rather than filing them away for a later date.

VAT is an important part of any successful business, but it can be a real headache. That’s why it’s often recommended to hire an accountant to handle it for you, but alternatively, you could invest in software to do it yourself. There’s plenty of help available so you don’t have to feel out of your depth when you register for VAT.




About Jemma Porter

About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

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