FAQs - VAT

1. Tell me about VAT.
2. I am in the process of purchasing a going concern, but wish to change part of the business (Gift Shop) into a Bakery Shop. Will I have to pay VAT on the business?
3. I have received two bills from two different hotels, one has charged 17.5% VAT against non-arrival charges and the other hotel has charged zero VAT. Please can you clarify if I should claim back VAT on the bill, or is this an error made by the hotel?
4. I would like to know if it is accurate that a company selling both new and secondhand computer equipment can charge the same percentage of VAT on both types of products? Are secondhand / refurbished goods essentially being taxed twice?
5. I would like to know when purchasing goods and services, how do I know which have VAT added and which don’t?
6. If a company is based in the UK and imports goods or services from another EC country, what is the tax rate return. Should it not be zero rated?
7. If I am setting up a new business, how do I register for VAT?
8. Is there VAT on fruit and veg?
9. Is VAT payable on educational material?

1. VAT registration is a legal requirement if your company sales are standard rated or a mix of zero rated and standard rated. The threshold is £61,000 or over. If your turnover is less than this, then VAT registration is voluntary.

In most cases we recommend that companies are registered for VAT. We will complete a VAT registration form and send it to HM Customs and Excise.

Whilst waiting for your registration to come through you can still invoice clients for your services by simply writing on the invoice "VAT registration pending, VAT invoice to follow."

Once registration is received then you will need to go back and invoice your clients for the VAT. This is called a VAT only invoice and should have on it your VAT registration number.

All subsequent invoices should have the registration number and VAT at 17.5% added to the cost of services.

Let us know if you would like us to send you an example of each of these invoices.

As well as charging VAT it can also be claimed back. To do this you must ensure that all receipts/invoices, where possible, are made out to the company. VAT can be claimed back on all vatable company purchases and where the receipt/invoice shows a VAT registration number.

If you are unsure about whether or not you can claim back the VAT then just ask and we will endeavour to help.

In certain circumstances VAT returns can be made monthly, quarterly and annually, but normally they are quarterly. Any VAT due is paid at the same time as the return is submitted. We will complete the VAT returns and send them to you to sign and send on with any payment due.

2. Assuming that you are registered for VAT from no later than when you take over the business, it is very likely that the sale and purchase will fall within the transfer of a going concern provisions - ie the vendor should not charge VAT on the sale. You might insist the vendor obtains a clearance from HM C&E if the proposal is to charge VAT.

3. The effect is neutral, as you are VAT registered.

However, a "non arrival" charge seems similar to a cancellation charge, and is outside the scope of VAT, and therefore no VAT is due.

4. Generally, VAT is chargeable at 17.5% on computer sales both new and secondhand. You can, however, opt to use the Secondhand Margin Scheme. Under this, you broadly charge VAT on the profit margin on secondhand goods. The rules are quite detailed and you should take professional advise prior to implementing it. You will also need to keep accurate records of stock purchases and sales.

5. If VAT has been added, traders are obliged by law to show this on your receipt.

The exact method varies - if you have your car serviced, you would expect to see the amount of VAT set out separately and the rate shown. If you go to a supermarket, they may just indicate by putting a star against the VAT registered items.

A valid VAT receipt must show the VAT registration number, which is nine digits long.

6. You should account for VAT at 17.5% on goods and services imported from other EU countries. This is done via a book keeping entry and in most instances you can reclaim the VAT at the same time you account for it so the net cost is nil.

It's done this way so that should the VAT not be recoverable (eg on goods or services used for private use) you have to account for the VAT but cannot claim it back - and therefore you have not obtained an advantage by purchasing from outside of the UK.

7. The VAT registration section of the HM Customs & Excise site has the relevant form and helpsheets.

See http://www.hmce.gov.uk/business/vat/vatregist.htm

8. They're zero rated/exempt if in a raw state. If processed, they're vatable.

9. It depends upon what is meant by 'educational material'. Printed books are zero rated, whereas writing paper, pads etc are subject to VAT. Educational Courses provided by state and (most) private schools, colleges and universities, as well as private tuition by a teacher of a subject ordinarily taught in a school or university, are all exempt from VAT. Educational courses provided by commercial organisations (ie organisations that are not a registered charity or state body) are likely to be subject to VAT.