Understanding Some VAT Basics

You only need to worry about VAT if your business is VAT registered. After you register, you can reclaim VAT on certain purchases, but you also have to charge and pay VAT on your sales.

Your company can voluntarily register for VAT and should if you can reclaim VAT on a significant proportion of your purchases. VAT registration is mandatory if you exceed certain VAT thresholds – currently, you must register if your annual sales reach £70,000 or above.

A basic knowledge of what you can and can’t claim VAT on pays off (literally!). You can find many books on this subject, and the VAT office also provides plenty of publications for specific industries. A quick look on the HM Revenue and Customs (HMRC) website at www.hmrc.gov.uk gives you a list of all publications. You can find the main VAT rules and procedures in Notice 700.