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All businesses have to pay taxes to operate in the UK. As most people know, Value Added Tax (VAT) is levied on the goods and services sold by a business. The VAT rate is +20%, but what does it mean for small businesses?
While VAT is relatively straightforward, it’s worth discussing it in detail so you can avoid financial headaches. Here at IBISS & CO., we offer tax advisory and accounting services for small businesses. In this blog, we’ll be going over how VAT affects your small businesses and how you can manage it effectively.
Why Does VAT Matter for Small Businesses?
When you register your business for VAT, you need to charge an additional ( Standard rate ) 20% on all goods or services you sell. This tax is payable on all invoices generated for sales. Businesses also need to pay the VAT return to HMRC after every three months. Most suppliers charge this amount to their customers, so they get most of the VAT. Whatever is left has to be paid to HMRC.
If a business is also paying VAT to their suppliers and it’s more than what they are getting from their customers, they can claim the difference in amount. This means VAT for a small business will work in their favour if they are VAT-registered.
If a business is not registered for VAT, or if the end-consumer in the supply chain doesn’t claim the VAT back, the business will be the one paying the hefty VAT amount.
Will my business suffer if I am not VAT registered?
If a small business’s annual turnover exceeds £90,000, they no longer have a choice and need to register for VAT. However, if the turnover is below this figure, then they need to make a choice. VAT for small businesses gives them the entitlement to claim VAT back.
VAT Record-Keeping for Small Businesses
Just like you need to keep records for HMRC, you also have to be on track with VAT record-keeping. Ensure you’re recording all business transactions and safely keeping documents like bank statements, receipts, cheque stubs, and bills. Separate all of your personal bills and finances from your business transactions.
Get Expert Help with VAT from IBISS & CO
For VAT registration visit on GOV.UK page
Being VAT-registered can help you save money. If you want any more help, consult the best tax advisors at IBISS & CO. Visit us today for VAT services or accounting services for small businesses or Visit our nearest office for expert VAT advice.
