When Value Added Tax was introduced in the UK in 1973 it was promised
that it would be "a simple tax". However, it has become increasingly
complex over the years.
Majors, Chartered Accountants
Hull HU1 2JJ
VAT is a tax on goods and services provided in the course of business
in the UK. Imports from outside the EU are also subject to UK VAT.
Some supplies are specifically exempted from VAT e.g. land, insurance,
postal services, betting, finance, education, health and welfare, burial,
sport and works of art.
Some supplies are zero-rated including food, books, construction of new
residential buildings, international transport, drugs and children's clothing.
Most items are taxable at standard rate which is currently 17.5%.
Sometimes the line drawn between exempt, zero-rated and standard-rated
supplies can be very fine and some research will be necessary in difficult cases.
Any business in the UK with a taxable turnover of more than £55,000 p.a.
must register with HM Customs & Excise for Value Added Tax.
Once registered, the business must charge VAT to its customers at the
rates applying at the time.
The business will then receive a Value Added Tax Return (usually every
three months). The business must complete and return the form within one
month following the end of the VAT period. At the same time it must pay
over any tax due to HM Customs & Excise.
Effectively, the amount payable is the amount of VAT charged to customers,
less the amount of VAT charged by suppliers.
Once registered, the business must issue VAT invoices to its customers
whenever requested. There are specific requirements for the information
contained in the invoices which include the VAT registration number (not
the same as the number received from Companies House) and the amount and
rate of any VAT charged.
There are also requirements for the keeping of accounting records.
Majors, Chartered Accountants, can assist in the setting up of company
systems and accounting records to satisfy the requirements.
Telephone: 01482 212057
Fax: 01482 217102
© Majors, Chartered Accountants, 2002; Updated 25 April 2002