Before You Register For VAT
VAT at a glance
- Registration threshold: £90,000 of taxable sales in any rolling 12 months.
- Rates: 20% standard, 5% reduced, 0% zero rate.
- Return and payment due 1 month and 7 days after the quarter end.
- Late payment penalties start after day 15.
- Reclaim on goods bought up to 4 years before registration.
VAT Accounting Services
VAT is the tax that catches business owners who have come to the UK from Russia, Ukraine, Poland, Lithuania or Latvia, because it works differently from the VAT they knew at home and because HMRC only explains it in English. Vtrahe does VAT registration, the quarterly returns and the HMRC correspondence for businesses across Birmingham, and we explain every step in Russian if that is the language you think in.
VAT By Trade
Most of our VAT clients are in 6 lines of business, and each one has its own trap.
| Trade | What catches people | Flat rate % |
|---|---|---|
| Construction subcontractor | Reverse charge: do not add VAT on invoices to a VAT registered contractor | 14.5% labour only, 9.5% with materials |
| Beauty and hairdressing | Chair and room rental is VATable at 20%, not exempt | 13% |
| Takeaway and restaurant | Hot food and eating in are 20%, cold takeaway food is 0% | 12.5% |
| Cleaning | Nearly all labour, so flat rate usually loses money after the 16.5% limited cost rule | 12% |
| Couriers and transport | Fuel VAT is the main reclaim, flat rate gives it up | 10% |
| Online sellers | Import VAT on stock from the EU, marketplace rules on Amazon and eBay | 7.5% retail |
Flat rate looks simple, and for a lot of these trades it is the wrong choice. The limited cost trader rule pushes any business spending under 2% of turnover on goods onto 16.5%, which costs more than the standard scheme would. We work both schemes out on your real figures before anything is decided.
When HMRC Writes Or Visits
HMRC VAT letters are dense even for native English speakers. Send them to us the day they arrive. We reply, and if it is a compliance visit we prepare the records, sit in the meeting and translate what the officer is asking, so a language misunderstanding is not recorded as a careless error.
You must register once taxable sales pass £90,000 in any 12 months, counted on a rolling basis, not by calendar year or tax year. Register within 30 days of the end of the month you crossed it.
This is the mistake that costs the most. A takeaway or a cleaning company grows past £90,000 without anyone adding up the last 12 months, HMRC finds it 2 years later, and the owner has to pay 20% VAT on all the sales since the crossing date out of money already spent. We check the rolling figure for clients anywhere near the line.
Since Brexit, goods arriving from Poland, Lithuania or Germany are imports. VAT is due at the border, and unless the business uses postponed VAT accounting it pays the VAT to the courier or freight agent up front and waits until the next return to get it back. With postponed accounting the import VAT is declared and reclaimed on the same return, so no cash leaves the business.
This needs the business’s EORI number on the customs paperwork and the monthly postponed VAT statement downloaded from HMRC. A lot of the import businesses we take on have been paying at the border for years because their freight agent never mentioned it.
FAQs
In Russia VAT was included in every price. Is it the same here?
Consumer prices in the UK include VAT, but invoices between businesses show it separately, and once you are registered you charge it on top of your price to other businesses. If your customers are the public you cannot pass it on, which is why registering makes a takeaway or salon 20% dearer overnight unless prices change.
Should I register before I reach £90,000?
If your customers are VAT registered businesses, usually yes. They reclaim what you charge and you reclaim VAT on your van, tools and materials. If your customers are the public, usually no, unless you have big set-up costs to reclaim.
Can I reclaim VAT on things I bought before I registered?
Goods still in the business bought up to 4 years before registration, and services bought up to 6 months before. Keep the invoices.
Do I need to charge VAT on labour to a contractor who is VAT registered?
No. Under the construction reverse charge the contractor accounts for it. Your invoice states that the reverse charge applies and shows no VAT. See the CIS page.
My previous accountant made a mistake on a return. Who pays the penalty?
The business does, but a mistake corrected before HMRC finds it carries a much lower penalty, often nil. Errors up to £10,000, or up to 1% of your turnover capped at £50,000, can go on the next return; larger ones go on form VAT652. We check the last 4 returns of new clients for this reason.
VAT Services We Provide
- Registration, including checking whether registering early would help.
- Quarterly MTD returns.
- Scheme comparison on your own numbers, and switching if the answer changes.
- Postponed VAT accounting and EORI set up for importers.
- Reverse charge invoicing for CIS businesses.
- Correcting past returns and voluntary disclosures.
- HMRC letters, inspections and appeals.
Returns, Deadlines And What Late Costs
The return and the payment are due 1 month and 7 days after the end of each VAT quarter, filed through Making Tax Digital software. We work in Xero, QuickBooks and FreeAgent.
Late return: 1 penalty point each time. At 4 points on quarterly returns HMRC charges £200, then £200 for every late return after that until you have filed on time for 12 months.
Late payment: Nothing for 14 days. Then 3% of what is outstanding at day 15, another 3% at day 30, then 10% a year charged daily from day 31, with interest running from day 1 on top. On a £10,000 quarter paid 6 weeks late that is around £900 gone.
A Time to Pay arrangement agreed with HMRC before day 15 stops the penalties. If the money is not going to be there, tell us before the deadline rather than after and we make that call.
Contact Us Today
Call +44 7756 548969 or fill in the Client Registration Form.
If you think you may already be over £90,000, send the last 12 months of sales and we will tell you where you stand before HMRC does. Rules on gov.uk.
