VAT is a tax that’s charged on most goods and services that VAT-registered businesses provide in the UK. It’s also charged on goods and some services that are imported from countries outside the European Union (EU), and brought into the UK from other EU countries.
VAT is charged when a VAT-registered business sells to either another business or to a non-business customer. When VAT-registered businesses buy goods or services they can generally reclaim the VAT they’ve paid.
There are three rates of VAT, depending on the goods or services the business provides. The rates are:
Standard – 20 per cent
Reduced – 5 per cent
Zero – 0 per cent
There are also some goods and services that are:
– exempt from VAT
– outside the UK VAT system altogether
VAT registration threshold
You must register for VAT if your business’ VAT taxable turnover for the previous 12 months is more than £77,000. This figure is known as the VAT registration threshold. The threshold changes – usually once a year announced in the Budget – so you should regularly check your turnover against the current threshold.
You must also register for VAT if either of the following applies:
– You think your VAT taxable turnover may go over the threshold in the next 30 days alone
– You take over a VAT-registered business as a going concern
VAT Deregistration threshold
The deregistration threshold is £75,000. If your VAT taxable turnover for the year is less than or equal to £75,000, or if you expect it to fall to £75,000 or less in the next 12 months, you can either:
– Stay registered for VAT or
– Ask for your VAT registration to be cancelled
For more information on VAT please contact our office or visit the HM Revenue & Customs website http://hmrc.gov.uk/vat/index.htm