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VAT For Business: Must-knows for VAT-registered businesses

Oct 27, 2022 | European VAT

If you own a business in the UK, then knowing VAT for business essential information will be really helpful for you. Learn more about them on this blog.

Things to Know about VAT for Business – VAT For Business: Must-knows for VAT-registered businesses

VAT is a typical component on many invoices and receipts, and we’re all used to seeing it. Is VAT, however, significant to small businesses? Is it mandatory for all businesses to charge VAT? What are the advantages and disadvantages of VAT registration? These are some of the most frequently asked questions by entrepreneurs.

We’ll look at what VAT is, the key aspects of VAT to remember, and whether you need to register for it in this post. With such knowledge, you’ll be able to make the best decisions for your company’s growth. This is essential for VAT-registered businesses.

What to Watch for VAT-registered businesses

VAT is one of the most complicated taxes in the United Kingdom. If a company’s taxable turnover in the previous 12 months exceeds the VAT threshold, it must register and account for VAT. Not just limited firms, but also sole traders (i.e., the self-employed) and members of an ordinary partnership are included.

Because there are so many rules, regulations, and schemes, getting the appropriate advice from companies such as Sterlinx Global is critical. For the time being, what are the most important facts about VAT that small business owners should be aware of?

What is VAT anyways? 

The word VAT, or Value Added Tax, is widely known within the European Union to refer to a percentage fee paid by customers when purchasing certain products and services. The UK has a VAT rate of 20% from January 2011. There are certain things to know about VAT for business.

Other countries call the same concept by various names. Australians, for example, have the Australian Goods and Services Tax (GST). We’ll stick to discussing VAT because we give accountancy services to UK firms.

When to charge customers VAT

A tax on consumer spending is known as VAT. It is assessed on products and services that are subject to VAT. When determining if something is subject to VAT, we must consider the following factors: Which rate of VAT should be applied to the transaction if it is subject to VAT? You may apply VAT under the following circumstances;

  • If a transaction is: a supply of goods or services; in exchange for some sort of consideration (normally monetary); 
  • deemed to be made in the UK or the Isle of Man; 
  • made by a taxable person (a taxable person is an individual, firm, company, or other entity that is or is required to be registered for VAT); 
  • and undertaken in the course or furtherance of business, it is considered to be within the scope of VAT.

When to claim back VAT

To claim your returns, you must file a VAT return to HMRC every three months. You must also show the VAT you charged your consumers in addition to the VAT you paid. HMRC will require confirmation that you purchased the products and services and charged VAT on the ones you sold to ensure you’re being transparent.

What is VAT charged on?

Goods and services that are sold by VAT-registered businesses are subject to a VAT imposition unless otherwise stated by HMRC. To begin charging VAT for business, you must first register for VAT.

Current VAT rates in the UK (standard rate, reduced rate, zero rates)

There are three rates of VAT imposed by HMRC, and they may vary across different goods and services categories. The current rates of VAT include standard rates, reduced rates, and zero rates that cover specific products.

Standard Rates: Most goods and services are subject to the standard rate. 

Reduced Rates: Some goods and services such as children’s car seats and home and energy are subject to 5% VAT. 

Zero Rate: Zero-rated goods include goods and services such as most food and children’s clothes. 

Flat Rate: You are required to pay a  fixed rate of VAT to HMRC and keep the difference between what you charge to customers and what you pay HMRC. Furthermore, you cannot reclaim VAT, except for assets that cost over £2,000

What is exempt from VAT?

Insurance, finance, and credit are examples of exempt goods and services. This list equally includes training and education and fundraising activities by charities. Other exempt services include subscriptions to membership organisations, selling, leasing, and letting of commercial buildings. 

However, this exemption can be waived by HMRC in some unique circumstances. 

Frequently Asked Questions

When Should I register for VAT? 

Businesses in the United Kingdom must register for VAT only if their yearly taxable turnover exceeds the VAT threshold in the previous 12 months or the next 30 days. The present VAT threshold of £85,000.

Do I have to register for VAT as a sole trader?

The answer is yes if your annual turnover exceeds the VAT level. For sole traders or partnerships, there are no particular exclusions from VAT registration. If their yearly sales reach the VAT threshold, sole traders, like limited corporations, must register for VAT. If your yearly turnover is less than the VAT threshold, you are not required to register for VAT, but you may do so voluntarily.

How do I register for VAT?

You can register for VAT via the GOV UK Website whether you are registering voluntarily or due to earnings having breached the threshold. 


You must choose the road that you believe is right for you, as with all major decisions. We aim to convey the facts clearly and concisely so that you have the best chance of making the right decision for you and your company. 

VAT can be complicated and cumbersome. Join us today at Sterlinx Global to ensure that you don’t have to worry about changing government policies and focus on what you love best, growing your business and servicing your customers. 

These must-knows, however, give you an indication of key things to watch as you begin registering and filing your VAT returns. For our clients in the E-commerce space, this equally ensures that you benefit from HMRC legislation and escape fines that could result from wrong filings. 

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