The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald

The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald.
By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.

It’s usually very near the top of the agenda for small businesses – VAT, or Value Added Tax.
If you are starting or have recently started a business, you need to comply with the VAT regulations.
VAT registered businesses act as unpaid tax collectors and are required to account both promptly and accurately for all the tax revenue collected by them.
The VAT system is policed by HMRC with heavy penalties for breaches of the legislation. Ignorance is not an acceptable excuse for not complying with the rules.
We highlight below some of the areas that you need to consider.
It is, however, important for you to seek specific professional advice appropriate to your circumstances.
What is VAT?
A transaction is within the scope of VAT if:
  • there is a supply of goods or services 
  • made in the UK 
  • by a taxable person 
  • in the course or furtherance of business. 
Businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs.
Similarly, VAT is charged on most goods and services purchased by the business. This is known as input VAT.
The output VAT is being collected from the customer by the business on behalf of HMRC and must be regularly paid over to them.
However the input VAT suffered on the goods and services purchased can be deducted from the amount of output tax owed. Please note that certain categories of input tax can never be reclaimed, such as that in respect of third party UK business entertainment and for most business cars.
Points to consider . . .
Taxable supplies are mainly either standard rated (20%) or zero rated (0%). The standard rate was 17.5% prior to 4 January 2011.
There is in addition a reduced rate of 5% which applies to a small number of certain specific taxable supplies.
There are certain supplies that are not taxable and these are known as exempt supplies.
There is an important distinction between exempt and zero rated supplies.
If your business is making only exempt supplies you cannot register for VAT and therefore cannot recover any input tax.
If your business is making zero rated supplies you should register for VAT as your supplies are taxable (but at 0%) and recovery of input tax is allowed.
Registration - is it necessary?
You are required to register for VAT if the value of your taxable supplies exceeds a set annual figure (£83,000 from 1 April 2016).
If you are making taxable supplies below the limit you can apply for voluntary registration. This would allow you to reclaim input VAT, which could result in a repayment of VAT if your business was principally making zero rated supplies.
If you have not yet started to make taxable supplies but intend to do so, you can apply for registration. In this way input tax on start up expenses can be recovered.
A taxable person is anyone who makes or intends to make taxable supplies and is required to be registered.
For the purpose of VAT registration a person includes:
  • individuals 
  • partnerships 
  • companies, clubs and associations 
  • charities. 
If any individual carries on two or more businesses all the supplies made in those businesses will be added together in determining whether or not the individual is required to register for VAT.
Once registered you must make a quarterly return to HMRC showing amounts of output tax to be accounted for and of deductible input tax together with other statistical information. All businesses have to file their returns online.
Returns must be completed within one month of the end of the period it covers, although generally an extra seven calendar days are allowed for online forms.
Electronic payment is also compulsory for all businesses.
Businesses who make zero rated supplies and who receive repayments of VAT may find it beneficial to submit monthly returns.
We’ll take look at other VAT issues in future Money Matters columns . . . . 

You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) -
We have a strong and experienced team with great local knowledge all geared-up to helping you get the very best from your finances – whether that is as an individual or as a business.
We stay ahead of the game by putting great store by continual professional development for our staff.
With Investors In People status at Clay Shaw Butler, we care passionately about making sure our staff have all the tools they need to serve you, our customers.
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The team at Clay Shaw Butler can be contacted on 01267 228500.
The team at Clay Shaw Butler are on Twitter. Look for @clayshawbutler. 


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