VAT or Value Added Tax is an important tariff that every business is expected to pay. Getting it done regularly is vital to ensure a steady profit margin and smooth operation. If you are the owner of a small business, you should pay extra attention to it.
Basics about VAT:
Apart from paying VAT for your business purchases, you can take VAT for your service. Whether you are a product-based or service-based company, you can charge your customers with this tax. However, you can register for VAT when your total annual turnover is more than £85000.
What are the Categories of VAT Rates?
The VAT rates vary according to the goods and services supplied by your company. You can get in-depth knowledge from reputed financial services in Yeovil. Below are the basic four categories of the tax:
- Standard Rate: The default rate of VAT in the UK is 20%, which is active from 4th January 2011. It is applied to all types of Goods and Services that do not fall under any exemption. The Standard VAT Rate was changed a number of times before being fixed to the current number. This was an attempt to mitigate the budget deficit in the UK.
- Reduced Rate: The reduced VAT rate is 5% and applies to certain goods and services. This includes domestic fuel, power and some sanitary equipment. Hospitality and hotel accommodation services were put under this slab during the COVID-19 Pandemic.
- Zero Rate: This is an exemption charged on services like food and drink, children’s accessories and books. You should know that the zero rate exemption does not apply to restaurants and takeaway services. If your service is eligible for Zero Rate, you do not need to register for VAT. However, you have to apply for an exemption.
- Exempt Supplies: There are different services that are exempt from all kinds of VAT. This includes education, finance and some health services. The business providing exempt supplies is not supposed to register for VAT. If you consider filing your business to VAT for exempt supplies, you may face difficulties in claiming the input taxes.
Applying for VAT makes your business compliant with the financial laws of the land. You should ensure to get proper guidance before going on with the process. Consult Whites Chartered Accountants, one of the reputed financial services in Yeovil. We can provide a customised solution for registering your business to VAT and calculating the annual tax.