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Value Added Tax (VAT)

The amount of Value added tax (VAT) a business pays to the HMRC or claims back is in fact the difference between the VAT charged on the invoice for the goods and services sold to the customer and VAT charged on the inwards invoice received by the business on its purchases.
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By using a flat rate VAT scheme:

  • The business will pay a fixed rate of value added tax to HMRC
  • The business can keep the difference between the VAT charged to the customers and the amount paid to HMRC

Post Brexit, we can expect certain changes. Essentially, VAT is a European tax and is levied throughout the European Union and is a key feature of the European single market. After leaving the EU in a political sense, the UK might still remain as a member of the single market with commitment to continue complying with EU VAT law.

VAT meets modern day fiscal requirements and in recent years most developed countries have shifted their fiscal balance, depending less on direct income taxes and more dependency on indirect consumption taxes such as VAT, and this trend is expected to continue. This was in March 2016 when the UK’s Office for Budget Responsibility confirmed that after income tax and national insurance contributions (NICs), VAT remains government’s third largest revenue raiser. In 2016/17 VAT was anticipated to produce £120bn – or 18% of total revenue of the government.

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Under the flat rate VAT scheme, VAT charged on a single purchase of capital expenditure goods can be reclaimed if the amount of purchase including the VAT amount is £2,000 or more. These capital expenditure goods are dealt outside the flat rate scheme i.e. the amount corresponding to input tax can be claimed in box 4 of the tax return. On the other hand, if the purchase is more than one or the invoice value is under £2,000 including VAT or it is a service then in such a scenario VAT cannot be claimed and the input tax is taken into account as part of the flat rate percentage calculation.

To have a better understanding of VAT and the applicable VAT rates, it is advisable to contact Property tax advisors to suggest the most appropriate VAT scheme for their business. All businesses might not be eligible for the flat rate VAT scheme.

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The pre-requisite for joining a flat rate scheme are:

  • The business must be a value added tax registered business
  • The business anticipates the value added tax turnover to be less than or equal to £150,000, excluding VAT, in the next 12 months. Here, the VAT turnover is referred to the total of all goods sold that are not VAT exempt

What we do?

  • Helping businesses register with HMRC for Value added tax (VAT)
  • Providing guidance and helping with VAT threshold computation
  • Prepare and collate documentation required by HMRC to support the claim

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