Any company with a turnover of more than the VAT threshold in any 12 mth period needs to register for VAT (Value Added Tax).
Once registered you then need to keep certain records for VAT and provide details of your VAT registration on receipts to customers. You then need to submit a return quarterly to the HMRC, along with any payment you may owe them.
On your return you show all of the VAT you have collected from customers, but can take off any VAT the business has paid as a customer to other VAT registered business. You then pay the HMRC the difference. If you have been charged more VAT than you charged to customers – they’ll even give you a refund!
From April 2019 businesses over the VAT threshold will need to submit returns under MTD for VAT using approved accounting software. We can submit MTD for VAT returns for all of our VAT clients.
VAT Due Dates and Penalties
Your VAT return and (cleared) payment are due within 1 calendar month of the end of the period, although online filing and payment get an extra 7 days. Therefore if your period ends on 31st January, you have until 7th March to submit your return online and pay any tax due. Please note that the payment has to clear to their bank by this date – not just leave your bank!
Late returns are automatically penalised if late more than once in a set period. Penalties range from 2% of your VAT bill for a second offence, to 15% for a fifth offence. Late payments are charged interest, but if you cannot afford to pay you should always submit your return, then contact the HMRC for help with payment – to minimise the charges you will incur.
As of March 2020 the VAT rate in the UK is 20%. The VAT threshold is £85,000 turnover in a 12-month rolling period.