VAT stands for Value Added Tax and is a tax which a business charges to either other businesses or the public for goods and services. The level of VAT which a country adheres to is set by the government and in recent times they have lowered the VAT rate to assist businesses with financial downturn. As of January 2011 the general UK VAT rate is 20% so a company which is registered for VAT purposes must charge their customers 20% on top of any other fee payable. Once a business is VAT registered they may offset any VAT they are charged for goods or services in the course of their business against the VAT they charge their customers.
A company has a legal requirement to register for VAT if their turnover exceeds £73,000.00 in any given tax year or if their projected income is likely to be for this amount. Businesses that are not likely to reach this turnover level are not legally required to register but may still do if they wish to. In order to fulfil their obligations to HM Revenue and Customs a business must file a VAT return at regular intervals, often quarterly and it is at that time that the bill for VAT is usually payable.
Registering for VAT
The process of registering for VAT is relatively simple. The information and guidance required is freely available on the website of HM Revenue and Customs and the forms can either be downloaded, printed off and sent by post or can be filled in online and submitted. Once the forms have been received and processed a company will be given a VAT certificate and registration number and will have to display this on all official invoicing papers.
For those businesses with neither the time nor inclination to go about the registration process personally many accountants as well as dedicated VAT registration companies will be able to register a company for a small one-off fee. An existing accountant will obviously also be able to lend assistance as part of their annual duties.
Submitting the Return
Again, the process of submitting a return can be done online, with downloaded papers which are then sent by post or can be completed by a third party such as an accountant.
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