If you’re a trader in the United Kingdom with rising taxable sales you will need to pay uk vat to enjoy all benefits offered by this taxation system. As soon as your taxable sales touch the vat threshold limit of ?70,000 in the past vat numbers 12 months then you need to apply for vat registration so that you too can become part of this tax system that is in effect in most European countries.
If you’re a really small trader that mostly sells retail goods then you can remain from the purview of vat or value added tax as long as your taxable sales don’t touch ?70,000 in 12 months. However, if your sales touch that figure or let’s say you sell goods to vat registered traders you would be better off being a vat registered trader in the UK. Vat continues to be employed as a way of collecting taxes on products or services in most of Europe and the UK too follows this system. The vat department in the UK is headed by HM Revenue and Customs or hmrc department.
Once you have crossed over the vat threshold limit for uk then you will have to apply for vat registration. That can be done even before you reach this limit if you think that you have to reclaim vat that has already been paid on goods and services, specifically in a foreign eu country where this method is followed. You should do the hiring of experienced vat agent well conversed in uk and eu vat rules for vat registration purposes and for filing of vat refunds to ensure that there are no problems in claiming back vat.
As soon as you do turn into a vat registered trader in the United Kingdom, which may extend to a month after you file an online vat application then you’ll need to charge vat according to the 14,000 services and goods classifications provided by the hmrc vat department. This will likely need to be carried out by each vat invoice that you will be required to issue during each taxable sale. UK has 3 vat rates beginning with the regular rate of 17.5%, reduced vat rate of 5%, and the zero vat rate. Certain services and goods are totally vat exempt too.
Once you turn into a vat registered trader so as to pay and collect uk vat based on vat invoices then you’ll also need to file your vat returns on a regular basis. Again, your vat agent is going to be necessary to calculate vat to get paid or refunded depending on your vat purchases and sales. In case you have imported goods or services in the United Kingdom after paying vat within a eu country then you can definitely avoid double taxation by filing a vat reclaim form. You will be awarded vat refund between four to 8 months after your claim is successfully processed by hmrc as well as the member country. Overall, vat is a good tax system to prevent double taxation as well as plug many loopholes which were present in the traditional sales tax system.
If you are a growing trader in the United Kingdom that sells taxable goods to vat registered traders then you need to keep the cycle of vat alive by turning into a vat registered trader. You can now collect and pay uk vat while also claiming any vat previously paid on imported goods and services, which will will lower tax overheads to a large extent.