Yes, I know that is a strange title, but I’m going to give you five interesting facts about VAT, really! “And why?” I hear you cry! Well, one, because I do need to get out more and two, it is actually good to know more about VAT rather than seeing it as just another tax we have to bear! I’m also going to pose a prize winning question somewhere in this blog so don’t forget to read through all of it; got you all interested now? So here we go:
1.What is VAT? It is actually a consumption tax! There are three main taxes in the UK, personal tax, corporation tax and VAT. VAT is the only indirect tax which means that it isn’t levied at point of income but it is applicable at point of consumption. However, it is an essential tax in the UK and is here to stay, whatever Brexit brings us!
2.When was it introduced to the UK? VAT as we know it was introduced to the UK in 1973 as a pre-requisite of joining the European Economic Community (EEC) – how far we have come since then! We already had purchase tax but to join the union we had to adopt VAT as we know it now. And the starting rate was . . . . (drum role) 10%! So, what will happen post 31st March? The end of VAT? Back to 10%? Both would be great outcomes for the British public but are about as likely as an agreement on the backstop!
3.What is the current income level for VAT registration? To keep this answer simple, if your income is above £85, 000 then you need to register for VAT. This is on a rolling period so if you’re building your empire make sure that you check your income over the last twelve months and don’t get caught out. As ever with VAT, there are other considerations so if you’re not sure whether you should register or not please do contact us.
4.The complexities of VAT! I see VAT like playing chess; it’s easy to learn the basics but to become a master takes years of experience! On the supplies bought in VAT can be claimed where charged (input VAT); VAT will need to be added to any sales to customers or clients (output VAT). The difference between the two is what you pay over to the HMRC. Simples!? If only it was really that simple. VAT law in the UK is one of the most complex in the world so having the advice of a professional is essential. At M:Power accounting we can help you to understand your VAT position and make sure you report it correctly.
5.And finally the question? Who likes a jaffa cake? Let me know the VAT history on this, whether it is VATable, or not, and why. The first correct answer will win an appropriate prize (only available to clients, not team or ICB members or husband!)
If any of the above raises a question about your own VAT situation please do get in touch.