VAT is one of the most complex taxes a business deals with, and many businesses overpay or underpay it without realising. Taxlab is a firm of Chartered Certified Accountants in Bathgate, West Lothian, helping businesses across Scotland register for VAT, choose the right VAT scheme and file accurate VAT returns on time under Making Tax Digital.
Our VAT services
- VAT registration – we tell you when you need to register, or whether registering voluntarily makes sense, and complete the application for you
- VAT returns – we prepare and submit your returns through Making Tax Digital software, on time every time
- Choosing the right VAT scheme – we check whether the Flat Rate, Cash Accounting or Annual Accounting Scheme would save you money or time
- VAT control and reconciliation – we make sure the VAT in your books agrees to what you have paid HMRC
- VAT advice and planning – on property, partial exemption, the domestic reverse charge for construction and other complex areas
- HMRC enquiries and disputes – we deal with HMRC on your behalf, including VAT inspections, penalty appeals and representation at the First-tier Tribunal
- VAT deregistration – if your turnover falls or your business stops trading
We also offer a free, no-obligation VAT health check to see whether you are paying the right amount of VAT.
What is VAT?
Value Added Tax (VAT) is a tax on most goods and services sold by VAT-registered businesses in the UK. VAT-registered businesses charge VAT on their sales (output VAT), reclaim the VAT on their business purchases (input VAT), and pay HMRC the difference. The money raised from VAT goes towards funding public services in the UK.
HMRC explains how to charge, reclaim and record VAT.
UK VAT rates
| Rate | % | Examples |
|---|---|---|
| Standard rate | 20% | Most goods and services |
| Reduced rate | 5% | Some goods and services, for example children’s car seats and home energy |
| Zero rate | 0% | For example, most food and children’s clothes |
Some things are exempt from VAT altogether, such as postage stamps and many financial and property transactions. Zero-rated sales still count towards your VAT turnover; exempt sales do not. See VAT rates on GOV.UK.
When do you need to register for VAT?
You must register for VAT if either:
- your total VAT-taxable turnover for the last 12 months goes over £90,000, or
- you expect your taxable turnover to go over £90,000 in the next 30 days alone.
The 12-month test is a rolling one, checked at the end of every month, not a calendar or tax year. If you go over the threshold, you must register within 30 days of the end of that month, and you are registered from the first day of the second month after you went over.
You can also register voluntarily below the threshold. This often helps if most of your customers are VAT-registered businesses, because they can reclaim the VAT you charge and you can reclaim VAT on your own costs. If you sell mainly to the public, registering early may make you more expensive than unregistered competitors. We can model both options for you.
If your taxable turnover falls below £88,000, you can ask HMRC to cancel your VAT registration.
VAT returns and deadlines
Most businesses send a VAT return every three months. The deadline for filing and paying is usually one calendar month and 7 days after the end of the VAT period. You must file a return even if there is no VAT to pay or reclaim.
Making Tax Digital for VAT
Under Making Tax Digital for VAT, all VAT-registered businesses must keep digital records and file VAT returns using compatible software. HMRC lists software that is compatible with MTD for VAT. As a Xero Silver Partner, we usually recommend Xero, which lets you file VAT returns online direct to HMRC. Xero’s own guides explain how VAT works and filing your VAT return.
VAT schemes for small businesses
- Flat Rate Scheme – you pay HMRC a fixed percentage of your VAT-inclusive turnover and keep the difference, but you cannot reclaim VAT on purchases, except certain capital assets over £2,000. You may be able to join if your VAT turnover is £150,000 or less (excluding VAT).
- Cash Accounting Scheme – you pay VAT when your customers pay you, rather than when you invoice. Available if your estimated VAT-taxable turnover is £1.35 million or less in the next 12 months.
- Annual Accounting Scheme – one VAT return a year, with advance payments during the year. Available if your estimated VAT-taxable turnover is £1.35 million or less in the next 12 months.
The right scheme depends on your margins, your customers and how quickly you get paid. We will compare them for you before you commit.
VAT penalties
For VAT periods starting on or after 1 January 2023, HMRC uses a points-based system for late VAT returns. You get a point for each late return, and once you reach the threshold (4 points for quarterly returns) you are charged a £200 penalty for each further late return. Separate late payment penalties apply if VAT is paid 16 or more days late, plus late payment interest. Read our guide to the VAT penalty regime.
Why choose Taxlab for VAT?
- Chartered Certified Accountants, regulated by ACCA
- Xero Silver Partner and FreeAgent Certified Practitioner
- VAT returns prepared from properly reconciled bookkeeping
- Fixed fees agreed in advance
- Based in Bathgate, West Lothian, working with businesses across Scotland
Starting a new business? Our business start-up service includes VAT registration advice.
VAT FAQs
Is food zero-rated or exempt from VAT?
Most food is zero-rated, which is different from exempt. Zero-rated sales count towards your VAT turnover and let you reclaim VAT on related costs. Catering, hot takeaway food and some items such as confectionery are standard-rated, so the detail matters for food businesses.
Can I reclaim VAT on costs from before I registered?
Often, yes. You can usually reclaim VAT on goods you still hold that were bought up to four years before registration, and on services bought up to six months before, provided they relate to your VATable business.
What happens if I register for VAT late?
You must pay HMRC the VAT you should have charged from the date you should have been registered, even if you did not charge it to customers, and a penalty may apply. If you think you may be over the threshold, talk to us straight away.
Talk to us about VAT
Call 0845 862 6009, email hello@taxlab.co.uk or message us on WhatsApp.
This page gives general information only and is not tax advice. Please take advice on your own circumstances before acting.