Advice and Facts on VAT
What is VAT?
Value Added Tax (VAT) is a tax businesses charge when they supply their goods and services in the United Kingdom or Isle of Man. It is also charged on goods, and some services, that are imported from places outside the European Community (EC) and on goods and services coming into the UK from another EC Member State.
The following are examples of business supplies:
• selling new and used goods, including hire purchase;
• providing a service, for example, hairdressing and decorating;
• charging an admission price to go into buildings; or
• self-employed people providing supplies, e.g some salesmen and subcontractors.
The following three factors play a part in determining whether or not you need to register :
• Taxable Supplies
The supply of any goods and services which are subject to VAT at any rate, including zero-rated, are called taxable supplies. (Exempt supplies are explained below)
• Distance Sales
Distance selling is when a taxable person in one European Community (EC) Member State supplies and delivers goods to a customer in another EC Member State and the customer is not: registered for VAT, or liable to be registered for VAT. The most common example of distance sales is mail order sales.
If you are an organisation or business, and not a private individual acting in a purely personal capacity, any goods you buy from a VAT registered supplier in another EC country for removal to the UK are known as acquisitions.
• Your taxable supplies, distance sales, or acquisitions are expected to exceed £79,000 in the next 30 days, or if you are already trading, and they have exceeded £79,000 in the past 12 months…
• Or, if you have taken over a VAT registered business as a going concern…
You must notify your Customs and Excise local VAT office immediately of liability to register for VAT. If: Your taxable supplies, distance sales, or acquisitions are not expected to exceed £79,000 in the next 30 days, and have not exceeded £79,000 in the past 12 months…
Then: VAT registration is not necessary in these circumstances although businesses can register for VAT on a voluntary basis to be able to reclaim VAT on purchases. Anyone who registers will also have to account for tax on their sales, where appropriate.