VAT

VAT Questions Answered

Q

What are the current VAT limits?

VAT registration is compulsory above £58,000 turnover (for the current tax year 2004 / 2005) per year turnover (or sales) or commision paid to you if you are acting as a commission agent, although you can register voluntarily at any time before that limit is reached.

Q

Should I register for VAT even though I have not reached £58,000 turnover?

The simple rule of thumb is this - if you are providing your service or product for non-VAT registered members of the public, or small companies, where there is a 'market limit' on your selling price then it is often best not to. Whereas if you are dealing with VAT registered companies you may find it beneficial to do so

For example: if you are buying a product for £10.00 plus VAT and selling it to members of the public for £100.00 then the following will apply:

 

 

Not VAT reg. selling to public

Buy for 11.75 (inc VAT) can't reclaim VAT

Sell at 100.00 (no VAT to repay)

Profit £88.25

Not VAT reg. selling to VAT reg companies

Buy for 11.75 (inc VAT) can't reclaim VAT

Sell at 100.00 (no VAT to repay)

Profit £88.25

VAT reg. selling to public

Buy for 11.75 (inc VAT) can reclaim VAT

Sell at 100.00 (but you pay VAT out of this)

Profit £75.11

VAT reg. selling to VAT reg. companies

Buy for 11.75 (inc VAT) can reclaim VAT

Sell at 117.50 (cust. reclaims VAT)

Profit £90.00

Q

What are Road Fuel Scale Charges and what are the current limits

When you are VAT registered you may reclaim VAT on the business portion of any fuel used during the execution of your business, so long as you have a VAT receipt. However you must pay a Scale Charge per vehicle as shown in the following table (correct as at 6th April 2002)

The first 4 columns are an annual scale charge, the second 4 are a quarterly and the last 4 are the monthly scale charges for diesel and petrol respectively.

Scale Charge Diesel

VAT due per car

Scale Charge Petrol

VAT due per car

Scale Charge Diesel

VAT due per car

Scale Charge Petrol

VAT due per car

Scale Charge Diesel

VAT due per car

Scale Charge Petrol

VAT due per car

1400cc or less

850

126.29

905

134.78

212

31.75

226

33.65

70

10.42

75

11.17

1400cc - 1999cc

850

126.29

1145

170.53

212

31.75

286

42.59

70

10.42

95

14.14

2000cc +

1075

160.10

1690

251.70

268

39.91

422

62.85

89

13.25

140

20.85

Q

How do I calculate what VAT to add or take off products?

Use the VAT Calculator supplied as part of the resources of this site. To access click here now.

Q

I am already VAT registered as a Sole Trader and I am starting a new business with a Partner - does this business have to be VAT registered also?

Not necessarily. If you and some other person intend to co-operate in making supplies as a joint venture this may constitute a partnership which would be a new and separate person for VAT purposes. However you are strongly advised to agree the VAT position with your local VAT Business Advice centre before trading.

Q

What evidence do I need to reclaim VAT on things I buy for the business?

In order to reclaim VAT you must have a VAT invoice - Invoices marked 'pro-forma' or THIS IS NOT A TAX (OR VAT) INVOICE' will not be sufficient evidence and may not be used - so make sure that you get a VAT invoice for what you buy (even at a Cash & Carry)