What is value-added tax?
Value-added tax (VAT) is collected at every stage of the supply chain cycle; from the manufacturer when he buys raw material; from the retailer when he buys certain products from the manufacturer and then from the consumer, where all tax is paid by the end-user that is the consumer.
- A product manufacturer buys raw materials for £10 plus £2 VAT payable to the government.
- The manufacturer then sells his product for £20 plus £4 VAT rendering only £2 to the government as the total VAT payable by the manufacturer is 20% of the selling price minus previously pay VAT on buying the raw material.
- At the end of the supply chain cycle, the retailer sells the product to the consumer for £30 plus £6 VAT, while he pays only £2 to the government as he has previously paid £4 VAT to the manufacturer.
Valued added tax is directed towards the end of the supply chain, where tax is deducted at every step of the sale cycle while the consumer pays the cumulative VAT.
When to register for VAT?
You have to register for VAT if:
- your turnover on VAT taxable products goes over £85,000.
- your total VAT taxable turnover is expected to exceed £85,000 over the next 30 days.
- your total VAT taxable turnover has been over £85,000 over the last 12 months.
Why you need an expert to handle VAT?
Filing for Value-added tax can be a tricky and complicated procedure in comparison to other tax types, which are single-step procedures, while VAT is a multi-step procedure. Getting VAT wrong can lead to overpaying tax or over-claiming VAT resulting in a fine. Moreover, every product is not liable to VAT, some services and products are exempt from VAT while on some products lower VAT is imposed. That is why taking help from a legal expert or tax professional is important for accurately filling your VAT. If you are concerned about your VAT, our experts at Lyel Accountant are here to help, our experts will take care of all the calculations and legalities from tax penalties.
|Most goods and services||20%|
|Lower VAT products i.e. home energy and children car seats||5%|
|Exempted products i.e. most food||0%|
VAT rates for good and services
If you would like more information regarding this, get in touch with us on 0113 436 0002 or use the form below.