VAT Rates and Registration Limits

Rate of VAT

The Standard rate of VAT returned back to 17.5% from 1 January 2010 following the temporary reduction to 15% between 1 December 2008 to 31 December 2009.

Registration

The annual registration limit with effect from 1 May 2009 is £68,000. A trader is required to register if:
     a) Turnover of £68,000 is expected within the next thirty days.
or b) The trader at the end of any month has exceeded turnover of £68,000 in the past twelve months.
For those considering cancellation of their registration their turnover must not exceed £66,000 in the next 12 months.

Online Filing

From 1 April 2010 all businesses with an annual turnover of £100,000 or more and all new businesses registering for VAT on or after 1 April 2010 must file their VAT returns online and pay any VAT due on the returns electronically. The requirement applies to VAT return periods starting on or after 1 April 2010. You will need to register and enrol for VAT online services in advance in order to file your return.

Fuel Scale Charge

The fuel scale charges for VAT apply where cars have private use and where input tax is claimed on fuel. The basis of calculating the charge is based on the carbon dioxide emissions.

For details of the VAT fuel scale charges click here

Cash Accounting Scheme

The annual turnover limit below which business can start to use the Cash Accounting Scheme is £1.35 million. Under this scheme a business accounts for VAT on a receipts and payments basis as opposed to an invoice basis. This is aimed to help cash flow for the smaller business so that VAT does not have to be paid to HM Customs & Excise prior to payment being received from the customer.

The annual turnover limit above which businesses must leave the scheme is £1.6 million.

VAT Flat Rate Scheme - How does the scheme work?

The flat rate scheme saves you time by removing the need to calculate and record output tax and input tax to calculate the net VAT due to HM Revenue & Customs. You simply record the VAT inclusive value of all your business supplies in a period -including exempt supplies. You then apply the flat rate percentage for your trade sector to your total income and that is the VAT you pay.

If you are making supplies to other VAT registered businesses, you give them a VAT invoice charging VAT at the normal rate for the supply (not the flat rate percentage).

Whether the scheme is beneficial will be a complex decision and should be discussed with your George Hay adviser.

For a list of the flat rate percentages click here.