Must You Register for VAT? Harnett Accountants in Kingston tell us more.

There is a myth in certain quarters that every legitimate business is required to be VAT registered. Harnett Accountants in Kingston insist that this is not the case. A sole-trader, partnership or company does not have to become VAT registered until the total sales for 12 consecutive months exceeds £73,000, this does however apply to all businesses you run.

If/Once your business is VAT registered you must charge VAT at the appropriate rate of 20% on all sales. You also have to submit regular quarterly/monthly VAT returns of sales and purchases. If this all sounds a bit too much to cope with, Harnett Accountants in Kingston suggest a number of designed schemes you can sign up to which make VAT reporting much easier for smaller businesses to handle.

For example, the Flat Rate Scheme, this allows you to just total-up your sales each quarter and not worry about your purchases, paying over a flat percentage of VAT to the Taxman. The percentage used will depend on your trade sector. If your business makes very few purchases you can benefit significantly from being within the flat rate scheme.

Another option which some smaller companies take is to keep their total sales below the compulsory VAT registration threshold, so they don’t have to charge or submit VAT. Although not illegal the Taxman is very suspicious of businesses who manage their sales in this way. In late 2011 the Taxman offered a limited amnesty to those who had sales over the VAT threshold but who had not registered for VAT. Once that amnesty period was over he started to actively investigate traders who reported total sales just below the VAT threshold. If you do use this strategy then you will need to be able to prove all your sales are correctly recorded and declared to avoid investigation.

Don’t forget that Harnett Accountants in West London offer a free hour no obligation consultation, alternatively keep reading our blogs or follow us on Twitter, Facebook or Google+ for all your accountancy tips/hints.

Tweet