"If your taxable turnover reaches £85,000, you must register for VAT. All turnover generated by non-VAT exempt sales is referred to as taxable turnover. Taxable turnover includes even transactions where the VAT rate is zero.

Companies who do not meet this criteria are not required to charge VAT on their sales and are not required to register with HM Revenue & Customs (HMRC).

If a company's revenue exceeds the threshold, it must contact HMRC and register for VAT.
Rather than a defined term like the tax year or the calendar year, this turnover criterion is calculated over a rolling 12-month period. As a result, it might be any 12-month period, such as the beginning of February to the end of January or beginning of September to the end of August.

Unregistered enterprises whose turnover is approaching the registration limit should keep a close eye on this since there are stringent deadlines for filing the registration and charging VAT once the turnover level has been exceeded."

"VAT applies similarly to any business structure in this context, including companies, partnerships, and sole traders.
Upon registration, HMRC will issue a VAT registration certificate confirming the business’ VAT number, effective date of registration and the due date of the first VAT return.

It should be noted that any business with a turnover below the threshold can choose to register for VAT, this is known as voluntary registration. There can be advantages of voluntarily registering for VAT, such as the ability to reclaim VAT on purchases and creating a more trustworthy and professional image to customers."

"Once registered, a business will need to include the relevant rate of VAT on all their taxable sales. This is referred to as output tax. The VAT is ultimately paid by their customers, but it is the business’ responsibility to report and pay this to HMRC.

Businesses can also usually reclaim VAT paid on business related purchases, which is known as input tax. However, some items are not eligible for VAT reclaims, such as entertaining costs, cars and (for unincorporated businesses) purchases used for private use."

"Calculating VAT is quite straightforward. To find VAT-inclusive prices, you can simply multiply the price excl. VAT by 1.2, thereby adding the standard 20% rate of VAT to the price. For the 5% reduced rate of VAT, simply multiply the price (excl. VAT) by 1.05.
If you wish to calculate VAT-exclusive prices, simply divide the total price (including VAT) by 1.2 for the standard (20%) rate, or by 1.05 for the reduced (5%) rate."

VAT registered businesses must report the amount of output tax and input tax to HMRC via the submission of a VAT Return. This is usually completed every quarter. Most VAT registered businesses that have a turnover in excess of £85,000 must also follow the rules for Making Tax Digital (MTD) for VAT, which were introduced in April 2019.

"A VAT Number, also known as VAT Registration Number, is a unique code that is issued to a company that is VAT registered. This number is 9 digits long and will usually feature GB at the start. HMRC will issue a company a VAT registration certificate on which the company can find their VAT number. It is very important that your VAT number is checked whenever submitting VAT returns. Mistakes in your VAT return can cause delays, while HMRC may disallow your tax input claim."

You can check whether a UK company is VAT registered using a service on the UK Government website. This service lets you check if a VAT Registration number is valid and will also allow you to look up the business name and address that the number is registered to. It can also be used to keep a record of when you have checked a UK VAT number.

"VAT registration is a legal obligation, failure to adhere to these rules can lead to substantial penalties and in the worst cases a custodial sentence.

The penalty levied by HMRC for late registration is worked out as a percentage of the VAT due (output tax less input tax), from the date when a business should have registered to the date when either HMRC receive your notification, or became fully aware that you were required to be registered. The rate of penalty depends on how late you were in registering:"

"If registered Penalty rate
Not more than 9 months late 5%
More than 9 months but not more than 18 months late 10%
more than 18 months late 15%
HMRC can also charge surcharges if they do not receive the VAT return or full payment for the VAT due by the deadline. These surcharges can be up to 15% of the VAT outstanding at the due date. They also have the power to levy penalties of up to 100% of any tax under-stated or over-claimed if a business sends a return that contains a careless or deliberate inaccuracy.
The above is aimed to be a quick introduction to VAT, but the reality is that the scope is far wider and can be extremely complicated. We haven't even touched here, on the areas of partial exemption or the VAT margin schemes. HMRC take VAT compliance seriously so it is essential that businesses account for VAT correctly. Specialist advice is, therefore, highly recommended."

"You may be able to reclaim VAT on goods and services that are used exclusively by your business, such as computers, office furniture, transportation, and third-party vendor costs (such as accountants).

You cannot reclaim VAT on goods and services intended for personal use, nor can you claim back VAT on business entertainment costs.

Reclaiming VAT requires completion of a quarterly VAT Return. This requires you to calculate the difference between the amount of VAT your business paid, and how much VAT the business charged, during an accounting period.

The process of reclaiming VAT is not simple, and there are many exceptions, exemptions and caveats that must be considered. Therefore, we strongly recommend discussing your requirements with a qualified business taxes expert."

"Many goods and services are exempt from VAT; however, there are often particular items within a goods or services category for which VAT is chargeable.

For example, food and drink is generally zero-rated for VAT; however, exceptions to this include hot food, crisps, alcoholic drinks, confectionery and soft drinks. Many of these exceptions have exceptions of their own!

There are far too many specific items to list here, but for a more in-depth look at which items are exempt from VAT or zero-rated, we suggest consulting a VAT specialist."

"Any business that makes sales that exceed the UK VAT threshold must register for VAT, this can include charities and their trading subsidiaries. VAT registered charities must charge VAT on any standard or reduced rated goods and services sold.

Charities may be able to claim VAT relief on certain goods and services; they may also be able to reclaim some of that VAT from HMRC. It is recommended that charities consult a tax expert to determine whether they qualify for either of these."

"Property related transactions can cover the full gamut of VAT possibilities – exempt, zero-rated, reduced-rated or standard rated.

Different rules can apply to purchases and sales, residential, commercial, or charitable buildings, construction, renovation and conversion. In some cases with commercial property there is a little flexibility, but it is important to decide on the correct approach at the outset because there are also potential pitfalls.

Property transactions tend to be high value, therefore getting the VAT treatment wrong can be expensive."

"Broadly speaking, land and property transactions are exempt from VAT. However, there are numerous exceptions which can result in supplies being standard rated, reduced rated, zero rated or exempt from VAT. This all depends on the nature of the property.

For VAT purposes, subject to meeting certain criteria, a property transferred as a going concern may not be a supply at all.

In addition to the array of different VAT treatments encountered when buying and selling property, there are further different VAT rules which apply to the construction of new buildings and to the conversion, renovation, and repair of existing buildings.

It is crucially important to understand what is what with regards to land and property VAT.

Unfortunately, when it comes to applying the correct VAT rate to land and property there is no ‘one-size-fits-all’ rule which can be applied. Every transaction must be considered on its own merit bearing in mind such issues as:

• Is the property a new build?
• Is the property commercial or residential?
• Is there an option to tax in place?
• Is the property being transferred as a going concern?
• Is the property a Capital Goods Scheme item?"

"As a starting point, VAT is chargeable at the standard rate on all goods and services unless an exception applies. However, many of the exceptions relate to the construction industry and a provision of construction services can be standard-rated, reduced-rated or zero-rated. VAT considerations for Construction When establishing whether construction services are subject to VAT the following should be considered: Is a new building being constructed? Is the building commercial or residential? Is the building being converted from commercial to residential? If you are carrying out work in the course of constructing a new commercial building, the standard rate of VAT applies. However, it is not so straight forward to apply the correct VAT treatment to other construction work. For example, the construction of a new dwelling is zero-rated only when certain conditions are met. How different construction work impacts VAT Work on existing buildings presents a challenge as it could be reduced-rated, for example, the conversion of a commercial property to a dwelling or you may be carrying out standard- rated repairs. Renovation work can be either reduced rated because the property has been empty for 2 years, or more, or standard rated if it is occupied. Further consideration is required when constructing communal residential buildings such as children’s homes, residential care homes, hospices, school boarding houses, student accommodation, monasteries, and nunneries. The VAT treatment of construction work may also depend on who the customer is. Is the work being carried out for a charity? Or a disabled person?"