Not everybody understands exactly what VAT is, but ensuring your business makes and receives the right payments is only possible with a good understanding. There are so many benefits to educating yourself about what VAT is, how to use it and why you need it and your business will be all the better for it.
VAT stands for value added tax, which is basically a bit of money that gets added on to products you buy and sell to customers. It is important to do this to pay your taxes to the HMRC as it is illegal to not pay your taxes.
Coleman & Co can help with all your VAT tax, whether you just want advice and information on the topic or you want us to take control – we are always available.
When Should You Be Using VAT For?
Staying on top of when you should be charging VAT and when you shouldn’t is vital for your business and can ensure that your customers are never spending too much money. There are several goods and services that do not require you to charge or pay VAT, including:
- Insurance, Finance & Credit
- Education & Training
- Fund Raising Events
- Selling, Leasing & Letting of Commercial Land & Buildings
Unless you are selling these services, your products should always have the added price of VAT. Additionally, you should be registered for VAT if your business does not fall into this category, this way you have the ability to reclaim money on the VAT that you have paid when ordering supplies for your company.
To reclaim this money, you must always keep hold of records to support your claim and then you will always have the chance of making at least some of your money back on the payments you make.
What Should You Be Charging?
How much you should be charging on VAT varies on each product and the initial price that you would sell the product at. There are 3 different rates of VAT and one of them should apply to you. The three rates of VAT are:
Standard Rate – Standard Rate is the VAT that applies to most of the products we sell. Unless your product falls into the other two categories, then you should always assume to charge the standard rate. Standard rate VAT is 20% of the products original price.
Reduced Rate – Reduced rate all depends upon the product that you are selling. This only usually applies when you are purchasing a product that is for elderly people are young children, such as children’s car seats or mobility aid products which should only be charged at 5% VAT.
Zero Rate – Zero rate is self-explanatory, you charge 0% on the product. The products that are sold must still be recorded in your accounts and applies to goods such as books; children’s clothes; helmets; goods exported outside the EU.
Making Your VAT Payments
Although the whole of the UK might hate it, we all have to pay our taxes! That includes all small and big businesses and sole traders as well. Whatever you charge as your VAT must always match what you then pay to HMRC – something you have to keep track of as the trading year goes in.
If you fail to make your payments accurately and on time, then it could mean big trouble for your business. There are several actions that the HMRC may take to ensure money is paid back such as taking you to court, closing down your business or collecting money through your earnings and pensions. These are all big problems when you are trying to run a business, which is why the easy option is to pay your taxes on time and ensure the money you pay is spot on.
If you are worried about VAT taxes, then get an expert to help. Coleman & Co will ensure there are no errors when it comes to monitoring your taxes and will deal with all payments and contact with the HMRC.
If you require assistance with your VAT tax or just want some advice for understanding, Coleman & Co are happy to help. Get in touch with our team today on 028 9266 3599 for additional information.