VAT: The Basics

1. An introduction to VAT and taxable supplies

1.1. What is VAT?

1.2. Which transactions is VAT applied to?

1.3. What is a taxable person?

1.4. What is a supply?

1.5. When is a supply made in the UK?

1.6. What counts as the UK?

1.7. What counts as a business?

1.8. What are exempt and “outside the scope” transactions?

1.9. What do the terms “output tax” and “input tax” mean?

1.10. What rate is VAT charged at?

2. Registration: how, when and why?

2.1. What is VAT registration?

2.2. When does a business need to register?

2.3. Can I register early?

2.4. What income counts for the purposes of the £85,000 tests?

2.5. Why would I register voluntarily?

2.6. What VAT planning is possible when registering?

2.7. Can I backdate a registration to maximise recovery?

2.8. How do I register?

2.9. When will I need to start charging VAT?

2.10. What if I need to charge VAT before receiving my VAT number?

3. Record keeping requirements and Making Tax Digital

3.1. What requirements do I need to adhere to once registered?

3.2. Is there a required form of VAT invoice?

3.3. What is the VAT account?

3.4. When is the VAT return due?

3.5. What if I make a mistake?

3.6. What is Making Tax Digital?

3.7. Do I need to buy new software?

4. Output tax: what should I charge?

4.1. When do I charge output tax?

4.2. How do the basic tax point rules work?

4.3. When does the actual tax point override the basic tax point?

4.4. Can I opt out of the 14-day rule?

4.5. What about extending the period?

4.6. What if the customer pays early?

4.7. Are there any planning opportunities with the tax point rules?

4.8. What amount do I add the VAT to?

4.9. How do I value non-monetary consideration?

4.10. What if there is no consideration?

4.11. Can HMRC can impose VAT where there is no commercial supply?

4.12. What counts as a gift?

4.13. What if I make occasional gifts to my employees?

4.14. What is a self-supply?

4.15. Do these rules apply to all self-supplies?

4.16. I’ve reported all my output tax, but the customer isn’t paying the invoice. What can I do?

4.17. Is there a way to speed up relief?

5. Input tax: what can I claim?

5.1. What is input tax?

5.2. What counts as a business purpose?

5.3. What if there is a mix of business and non-business expenditure?

5.4. Which is better?

5.5. What does “attributable to taxable supplies” mean?

5.6. When is input tax blocked?

5.7. What about cars?

5.8. What about fuel for vehicles?

5.9. When is a supply made to the claimant?

5.10. How do I know if VAT has been correctly charged?

6. Businesses with more than one activity: partial exemption

6.1. When is a business “partially exempt”?

6.2. What are the de minimis limits?

6.3. What is the standard method of apportionment?

6.4. What about special methods?

6.5. When do I need to make the annual adjustment?

6.6. What happens if the intended use of an asset changes?

7. HMRC’s powers and the penalty system

7.1. What powers does HMRC have in respect of VAT?

7.2. What are assurance visits?

7.3. What information is HMRC entitled to?

7.4. When will HMRC request security?

7.5. What are distress proceedings?

7.6. When can joint and several liability be applied?

7.7. What do I need to know about VAT assessments?

7.8. How did the penalty system work for VAT prior to 2023?

7.9. How is the new system different?

7.10. What about late filing?

8. VAT schemes that can help small businesses

8.1. What is the flat rate scheme?

8.2. What are the advantages and disadvantages?

8.3. What is the cash accounting scheme?

8.4. When is the CAS likely to be beneficial to me?

8.5. Can I use the CAS and FRS at the same time?

8.6. What is the annual accounting scheme?

8.7. What are the advantages?

8.8. Are there any disadvantages?

9. Appendix

9.1. Relevant flat rate scheme percentages