VAT

For most VAT registered businesses, the VAT return needs to be filed on a quarterly basis.  Somehow it never seems to be 3 months ago when it rolls round again.

The current threshold for VAT registration is £90,000 so if your business makes taxable supplies of this amount over the last 12 months or reasonably expects to exceed this in the next 30 days then it has to register for VAT.

Making Tax Digital (MTD) for VAT started in 2019 and means that VAT returns have to be filed through software rather than typing in the figures on the HMRC website as previous.  If you don’t already use accounting software and are going to register for VAT then we can help to set you up and handle your filings.  You may prefer to file your own returns, if so then we can do a periodic review for you.  Another pair of eyes to spot any potential issues is always good to have.

VAT Schemes

While most businesses will be a standard quarterly return, there are other schemes available.  JB Accounts can advise you if your business qualifies for different schemes and if it will be of benefit.  Different schemes have different qualifying criteria and they don’t suit all businesses.

A garage that sells second hand cars can benefit from using the VAT margin scheme.  This means that the VAT charged to the customer is based on just the profit and not the total value of the car.

As an example, car A is bought for £400 and is sold for £600 inclusive of VAT.

Normal VAT rules: £600 sales price is £500 + £100 VAT

Using the margin scheme, first work out the profit: £600 – £400 = £200.  20% VAT on £200 is £40

In both cases the business buys and sells the car for the same amount but with the margin scheme, only has to pass £40 over to HMRC whereas without this it has to pay over £100.