The complete guide to understanding VAT returns for small businesses in the UK. Our presentation includes: VAT principles and how VAT is collected, the different types of VAT rates and categories they apply to, how VAT returns are calculated for small businesses selling exempt products, VAT registration rules and advice, the three VAT schemes explained, useful real-world examples and much more.
The sales tax structure has become simple & transparent after implementation of VAT system in India, also helping in avoiding cascading effect of tax. Summarized provisions are provided in attached PPT..
This looks at when a charity can buy advertising or construction without paying VAT; when a charity must register for VAT; the cultural exemption and what a VAT-registered charity must do when seeking to reclaim VAT.
This presentation is all about the basics of Value added Tax in rajasthan...and basically covers all the aspects as are related to VAT as per the White Paper Policy.
What is Value Added Tax (VAT)?
**An indirect tax imposed at each stage of production and supply.
**In general, the ultimate consumer is the one who bears the full cost of this tax while the business collects and
calculates the tax and pays it in favor of the state.
**A 5% is imposed on multiple production stages with the right to deduct taxes on inputs from taxes collected
from production outputs.
**The tax is collected each stage of the economic cycle (production, distribution, consumption)
Value added = Sale Price – Purchasing or Production cost
Profit extraction and investment for family and OMB businesses - Bodmin/RedruthPKF Francis Clark
This practical seminar will look at options and opportunities available under current and proposed tax legislation. We will examine the taxation consequences but also highlight broader commercial and practical issues in relation to profit extraction and investment. Our aim is that delegates will have a better idea of how to ensure they and their businesses continue to thrive.
Profit extraction and investment for family and OMB businesses - ExeterPKF Francis Clark
This practical seminar will look at options and opportunities available under current and proposed tax legislation. We will examine the taxation consequences but also highlight broader commercial and practical issues in relation to profit extraction and investment. Our aim is that delegates will have a better idea of how to ensure they and their businesses continue to thrive.
The sales tax structure has become simple & transparent after implementation of VAT system in India, also helping in avoiding cascading effect of tax. Summarized provisions are provided in attached PPT..
This looks at when a charity can buy advertising or construction without paying VAT; when a charity must register for VAT; the cultural exemption and what a VAT-registered charity must do when seeking to reclaim VAT.
This presentation is all about the basics of Value added Tax in rajasthan...and basically covers all the aspects as are related to VAT as per the White Paper Policy.
What is Value Added Tax (VAT)?
**An indirect tax imposed at each stage of production and supply.
**In general, the ultimate consumer is the one who bears the full cost of this tax while the business collects and
calculates the tax and pays it in favor of the state.
**A 5% is imposed on multiple production stages with the right to deduct taxes on inputs from taxes collected
from production outputs.
**The tax is collected each stage of the economic cycle (production, distribution, consumption)
Value added = Sale Price – Purchasing or Production cost
Profit extraction and investment for family and OMB businesses - Bodmin/RedruthPKF Francis Clark
This practical seminar will look at options and opportunities available under current and proposed tax legislation. We will examine the taxation consequences but also highlight broader commercial and practical issues in relation to profit extraction and investment. Our aim is that delegates will have a better idea of how to ensure they and their businesses continue to thrive.
Profit extraction and investment for family and OMB businesses - ExeterPKF Francis Clark
This practical seminar will look at options and opportunities available under current and proposed tax legislation. We will examine the taxation consequences but also highlight broader commercial and practical issues in relation to profit extraction and investment. Our aim is that delegates will have a better idea of how to ensure they and their businesses continue to thrive.
Bookkeeping for Small Business in Ireland.pptxrosekervick
For new small business owners in Ireland, accountantonline.ie presents webinars regularly to its clients on how to manage the financial aspects of your new small business. In this webinar we talk about --Keeping records – what types of records you should keep, for how long, and what are the most efficient and organised ways to store your documents VAT – Revenue compliance requirements Financial terminology – we’ll help you to understand key bookkeeping terms like bank reconciliation, accounts payable and accounts receivable Understanding financial data – the importance of accurate data to make good business decisions.
Bookkeeping involves keeping track of your financial records, such as receipts, expenses, invoices, and bank statements in your business.
From a practical perspective it involves:
Data entry
Reconciliations
Aged analysis & credit control
Reporting
Good bookkeeping can help to grow your business. But what is good bookkeeping?
Accounting is a bit more complicated than bookkeeping.
Accountants may oversee your bookkeeping and make sure the records are maintained correctly but they don’t usually carry out any data entry. Your accountant will prepare technical accounting duties like preparing profit and loss accounts, balance sheets and file your tax returns.
Types of documents needed for bookkeeping: Sales and purchase invoices/receipts
Bank and Visa statements
Payslips and wage sheets
Stock / ecommerce / Point Of Sale (POS) reports
Verification records for assets such as property, machinery or vehicles
Cash books and receipts
We also cover Accounting software, VAT registrations, reverse charge VAT
Understanding Financial Data – What do I need to have/know
Budgets
Income Statement
Profit and Loss A/C
Balance Sheet
Cash Flow
Debtors/Creditors
The standard VAT rate will be 5% unless a zero rate or exemption applies.
The Member States have the right to subject the following sectors to a zero rate or to exempt them from VAT:
Education
Health
Real estate
Local transport
The Member States have the right to subject the oil sector, petroleum derivatives, and gas to a zero rate of VAT.
Individual GCC countries have the right to subject certain food products to a zero rate of VAT.
The Member States have the right to subject medical supplies to a zero rate of VAT.
Intra-GCC and international transport will be subject to a zero rate of VAT.
The export of goods to jurisdictions outside of the GCC Member States will be subject to a zero rate of VAT.
The Member States have the right to exempt Financial Services from VAT. The term financial services is not defined but broadly the exemption will generally relate to dealings in money, securities, foreign exchange and the operation and management of loan accounts, deposits, trade credit facilities and related intermediary services. The exemption is not expected to extend to fee based services transacted by a financial institution. However, Member States may choose to apply different VAT treatments to financial services if they wish.
Supplies of goods and services from a VAT registered person in one Member State to a VAT registered person in another Member State are subject to the reverse charge mechanism.
VAT grouping appears to be permitted between two or more legal persons resident in the same Member State.
The treatment of GCC free zones is not addressed and it is left to each Member State to determine its own VAT treatment for free zones.
Businesses with an annual revenue of over AED 375,000 will be required to register for VAT purposes.
Businesses with an annual revenue between AED 187,500 and AED 375,000 will have the option to register for VAT purposes.
Presentation on updates of VAT in UAE is in line with the various advisories issued by Ministry of Finance along with the expert views. VAT is being implemented in the UAE wef 1st January 2018. Presentation has impact of VAT/ Steps to follow to become VAT compliant/ thresholds for VAT registration with process to be followed.
Vat Registration UAE We Offer VAT Registration Services in UAE | Our experienced account managers Will take VAT and excise tax registration.
https://www.ebs.ae/vat-registration-uae/
2. Understanding VAT for Small Businesses
The principles
• VAT stands for Value Added Tax
• VAT is a form of indirect taxation
• Standard rated VAT tends to be on the majority of services and products that
are seen as discretionary / non-essential purchases
Principles
How it works
for VAT registered
companies
• VAT is due to HMRC on certain sales (outputs) and recoverable from HMRC
on certain purchases (inputs).
• VAT registered entities have a duty to complete VAT returns “usually
quarterly”
• VAT returns now submitted online (paper returns no longer accepted)
• Principle is that if output tax exceeds input tax, the business pays the excess
to HMRC, but equally if input tax is less than output tax a refund is due
• Standard VAT rate is 20% and is payable on most of products and services
• There is also a 0% VAT rate (zero-rated) on certain items i.e. Children’s
clothes
• Some services are exempt e.g. insurance
• Some items have a different rate e.g. 5% rate for the supply of electricity
How it works
for consumers
3. Understanding VAT for Small Businesses
VAT bill is ultimately picked up by the consumer;
But collected in stages throughout the supply chain
WHOLESALER MANUFACTURER CONSUMER
• Gail chops down a tree
and turns it into timber
• She sells it to Ollie for
£400 + VAT
• £400 is Gail’s income
• £80 is VAT payable
• Ollie turns the timber
into a sofa
• He sells it to Duncan for
£1,000 + VAT
• £1,000 is Ollie’s income
• £200 is VAT payable
RETAILER
• Duncan runs a furniture
shop
• He sells it for £2,000 +
VAT
• £2,000 is Duncan’s
income
• £400 is VAT payable
• The consumer pays
£2,400
• Because he is not VAT
registered, he can’t
reclaim the tax
HMRC
•Paid: £80
•Reclaimed: £0
•HMRC net: £80
HMRC
•Paid: £200
•Reclaimed: £80
•HMRC net: £120
HMRC
•Paid: £400
•Reclaimed: £200
•HMRC net: £200
HMRC
•Paid: £400
•Reclaimed: £0
•HMRC paid by retailer
£400 collected in 3 stages
throughout the supply chain
4. Understanding VAT for Small Businesses
Quiz: Using the principle of VAT being applied to “non-essential” items,
allocate these to Standard rated, Zero rated, exempt and outside the scope
And the answers are…
Newspapers
Fruit & Vegetables
Meal at a restaurant
Salaries
Education
PAYE
Cakes
Biscuits
Accountancy
Residential rent
Alcohol
Water Postage stamps
Charitable donations
Hot food
Cold food
5. Understanding VAT for Small Businesses
Answers
STANDARD RATED ZERO RATED EXEMPT OUTSIDE THE SCOPE
Newspapers
Fruit & Vegetables
Cold food
Biscuits
Meal at a restaurant
Postage stamps Salaries
Accountancy
PAYEResidential rent
Alcohol Water
Education Charitable donations
taxed
elsewhere
So how are Zero Rated items and Exempt items treated on a VAT return?
Hot food Cakes
“discretionary”
items
“essential”
items
cash-like
items
(+ education)
Trivia: In 1991 HMRC attempted to reclassify Jaffa Cakes as biscuits. They lost and thankfully Jaffa Cakes are still VAT free.
6. Understanding VAT for Small Businesses
Companies that only supply VAT exempt products or services
cannot reclaim VAT on their expenses
Normal VAT
registered business
PAYS VAT ON: RECLAIMS VAT ON: EXAMPLE:
• All products and
services
• All supplies and
expenses which are
standard rated
• Furniture retailer handing over
VAT on consumer purchases
but reclaiming VAT on cost of
goods sold
Business that
supplies
VAT exempt
products
• Nothing • Nothing (not allowed
to reclaim VAT on
normal standard
rated items)
• Company set up sub-let
residential property e.g. not
VAT paid on sub-rent, but
cannot reclaim VAT on normal
office expenses
Business that
supplies both VAT
exempt products
and standard rated
products / services
• Only standard
rated products /
services
• Purchases directly
connected to
standard rated
products / services +
an apportionment of
shared expenses
• Company that provides sub-let
serviced accommodation with
laundry and catering services
• VAT only reclaimable on
laundry and catering direct
costs and a portion of shared
VATable expenses
Businesses that sell VAT exempt products can’t reclaim VAT,
but those with zero rated products can
7. Understanding VAT for Small Businesses
When should you register for VAT?
• Entities must register for VAT if their turnover goes over £79,000When do you need
to register
for VAT?
• Small companies that sell to consumers have a price advantage over bigger
competitors because they effectively charge 20% less
• Companies that provide VAT exempt supplies cannot VAT register
Does it make
sense to
register before
you need to?
Are there any
disadvantages or
restrictions?
• Registration is voluntary at any stage below £79,000 if you make standard
or zero rated supplies, this is advantageous for:
• Zero rated suppliers (e.g. greengrocers) as they will receive regular
refunds from HMRC because their outputs will be nil
• Start ups with significant VATable expenditure but with limited initial
revenue (which will help ease cashflow)
However, being registered for VAT, doesn’t stop certain items being “Blocked”
i.e. where VAT is charged but not recoverable on your VAT return
8. Understanding VAT for Small Businesses
Blocked VAT is where VAT is charged but not recoverable on your VAT return:
pick out the two blocked input VAT items
And the answers are…
Motor Cars
Telephone
Client Entertaining
Travel
Food
Legal fees
Rent
Computers
Insurance
Gas & Electricity
Staff Entertaining
9. Understanding VAT for Small Businesses
Blocked VAT is where VAT is charged but not recoverable on your VAT return:
pick out the two blocked input VAT items
Motor Cars
Telephone
Client Entertaining
Staff Entertaining
Travel
Food
Legal fees
Rent
Computers
Insurance
Gas & Electricity
Effectively inflates the price of these types of expenses by 20%
Note: In the case of leased motor cars only 50% of the VAT can be reclaimed i.e. 10% unless the car is exclusively for business use like a pool car
10. Understanding VAT for Small Businesses
There are three main VAT schemes
each with pros and cons
• Mostly commonly used
scheme
• VAT declared on outputs and
inputs when invoices are
raised
Accrual
Flat rate
Cash
FEATURES PROs CONs
• Flat rate percentage of
revenue based on
service/product provided
• Percentage advised by HMRC
is then multiplied by gross
turnover.
• Maximum of £150k net
turnover
• VAT declared on outputs and
inputs when the cash is
actually paid
• £1.35m net sales limit
• Easy to prepare by just
including transaction by
invoice date
• Low accountancy costs
• All accounting software can
deal with this scheme
• Need to pay VAT before cash is
received
• Cash flow issues e.g. if large sales
invoice in period
• Bad debt risk – takes at least 9
months to reclaim VAT if an invoice
is never paid by a customer
• Cash flow benefit as only pay
VAT when it is actually paid
• No bad debt risk
• Time consuming to administer as
VAT return requires different dates
to annual accounts
• Not all software supports it
• VAT bills arguably more likely to
fluctuate vs accrual method
• Potential cash saving
• Very easy to administer
• Can also be prepared on cash
basis
• Only available to smallest
businesses
• Must continuously monitor costs to
make sure still most cost effective
scheme, e.g. if supplier starts
charging VAT
• Slightly more difficult to administer
in terms of annual accounts
Cash scheme generally better for small business;
Accrual scheme generally easier for accountants!
Key difference is
timing of invoices
11. Understanding VAT for Small Businesses
Flat Rate Scheme means that VAT is paid on Revenue
at a certain percentage (determined by your industry)
The flat rate of VAT is determined by industry as
follows:
• Accountancy 14.5%
• Advertising 11%
• Estate Agents 12%
• Farming 6.5%
• Hotels 10.5%
• Pubs 6.5%
In addition, you can re-claim the input VAT at the
normal rate on capital items over £2,000 (gross).
FLAT RATE PERCENTAGES
• Technically speaking companies will benefit from
the flat rate if their VATable supplies are less than:
• 20% minus (20% - applicable flat rate)
• Divided by 20%
• Multiplied by their VATable revenue
• Hotel example
• 20 % - flat rate = 20% - 9.5% = 10.5%
• Divided by 20% = 52.5%
• Multiplied by revenue of £100k = £52.5k
so in this case if the value of the Hotel’s VATable
supplies are less than £52.5k, then they will
save money by opting for a flat rate scheme
WHEN TO OPT FOR THE FLAT RATE
Generally, any business owner who suspects he or she has a lower cost
structure than average should consider it (but remember the £150k limit)
12. Understanding VAT for Small Businesses
VAT Flat Rate Scheme
Estate Agent Worked Example
Net revenue*: £120,000
Wages (40,000)
Rent - exempt (15,000)
Telephone* (2,400)
Computer* (3,600)
Travel (1,500)
Accountancy* (7,200)
Profit: £50,300
Note: * VATable item
All figures net of VAT
ESTATE AGENT EXAMPLE
ACCRUAL SCHEME
•VAT payable: £24,000
•VAT reclaimable: £2,640
•HMRC net: £21,360
FLAT RATE SCHEME
•Net revenue: £120,000
•Gross revenue: £144,000
•VAT payable: £17,280
•Less computer: £720
•HMRC net: £16,560
£4,800
saved by flat
rate scheme
13. Understanding VAT for Small Businesses
Commercial property transactions can be optionally taxed
Option to tax:
•If supply of building/land is exempt can opt
to tax
•i.e. opt to treat as a taxable supply and
charge VAT
Implications:
• Standard rated VAT will be charged on
sale or lease
• Input tax relating to supply may be
recovered
• Once made option applies for 20 years
• If land/building is sold where option to
tax has been made, VAT needs to be
charged on sale of land/building
• Construction of new commercial
building
• Sales of new commercial building
under 3 years old
• Work on existing commercial
building
• Sale of old commercial building
(over 3 years old)
• Lease of commercial building
• But option to tax is available
Option to tax is only useful if a landlord
has significant other VATable expenses
Standard rate on
Commercial
Buildings
VAT exempt on
Commercial
Buildings
14. Understanding VAT for Small Businesses
Summary
• VAT is ultimately charged in full to the consumer, but it is collected in stages
throughout the supply chain
• VAT was intended to apply to all non-essential items and children’s shoes,
water and certain types of food are still exempt
Principles
For Small
Businesses
Special
cases
• Businesses that sell VAT exempt products can’t reclaim VAT, but those with
zero rated products can
• VAT registration is required over £79k turnover
• There are three VAT schemes: Accrual, Cash and Flat rate each with pros and
cons
• Owners of commercial property can opt to apply VAT if they have significant
VATable operating expenses
15. Understanding VAT for Small Businesses
Thanks
Thank you for reading!
Need further help with the preparation and completion of
your VAT returns? Our team are happy to answer any of
your questions.
Contact Us
Accounts and Legal Ltd.
20 Kentish Town Road,
London, NW1 9NX
0207 043 4000
info@accountsandlegal.co.uk
YOUR TEAM
16. CONFIDENTIAL
This Confidential Insight Report (the “Insight Report”) has been collated by Accounts and Legal Consultants Ltd (the “Accountant”), solely for the informational purposes of the
shareholders and management team of the company named on the cover sheet of this document (the “Company”) from information furnished by the management team of the
Company and other public and proprietary sources.
It is further agreed that the recipient of the Insight Report agrees to treat all information contained in the document as strictly confidential, being for use only by the
shareholders and management team of the Company and for informational purposes only. The Insight Report does not purport to offer investment advice and may not be
relied upon as such. The Insight Report may not be copied or distributed by recipients to third parties without the prior written consent of the Accountant.
The information contained herein has been prepared to assist the management team and shareholders of the Company in making an assessment of the financial and
operational performance of the business and does not purport to contain all the information that a management team or shareholder may need to determine the appropriate
strategy for the Company. The Accountant does not make any representation or warranty (express or implied) as to the accuracy or completeness of the Insight Report or any of
the information contained or referred to herein, and shall not have any liability resulting from the use of, or any omissions from, the Insight Report.
The Insight Report contains certain financial data, estimates and projections and other forward-looking statements, which have been prepared based upon information provided
by the management of the Company and other sources, and which involve significant assumptions, elements of subjective judgement and analysis that may or may not be
correct and are subject, among other things, to business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company.
Accordingly, there can be no assurance that any of the estimated and projected results will be achieved. Actual results can be expected to vary from those set forth in or implied
by such estimates, projections and other forward-looking statements, and such variations may be material and adverse.
All requests for additional information should be made to:
Accounts and Legal Consultants Ltd
0207 043 4000
20 Kentish Town Road
London
NW1 9NX