WHERE LOCAL BUSINESS GROWS

How VAT Works

You can only charge Value Added Tax (VAT) if your business is registered for VAT. Find out what this involves and read an overview of how VAT works, including when to charge and what you can reclaim.


When can I charge VAT, and on what?
 

You can only charge VAT if your business is registered for VAT.

VAT is charged on things like:

  • business sales - eg when you sell goods and services
  • hiring or loaning goods to someone
  • selling business assets
  • commission
  • items sold to staff - eg canteen meals
  • business goods used for personal reasons
  • ‘non-sales’ like bartering, part-exchange and gifts
These are known as ‘taxable supplies’. There are different rules for imports and exports and charities.

Responsibilities

VAT-registered businesses:

  • must charge VAT on their goods or services
  • may reclaim any VAT they’ve paid on business-related goods or services
If you’re a VAT-registered business you must report to HM Revenue and Customs (HMRC) the amount of VAT you’ve charged and the amount of VAT you’ve paid. This is done through your VAT Return which is usually due every 3 months.

You may want to appoint an agent to deal with HMRC on your behalf.

You must account for VAT on the full value of what you sell, even if you:

  • receive goods or services instead of money (eg if you take something in part-exchange)
  • haven’t charged any VAT to the customer - whatever price you charge is treated as including VAT
If you’ve charged more VAT than you’ve paid, you have to pay the difference to HMRC. If you’ve paid more VAT than you’ve charged, you can reclaim the difference from HMRC.

VAT rates
 

There are 3 different rates of VAT and you must make sure you charge the right amount.

Get a list of reduced or zero-rated goods and services

Standard rate

Most goods and services are standard rate. You should charge this rate unless the goods or services are classed as reduced or zero-rated.

Reduced rate

When to charge this rate can depend on the item being provided but also the circumstance of the sale. For example:

  • children’s car seats and domestic fuel or power are always charged at 5%
  • mobility aids for older people are only charged at 5% if they’re for someone over 60 and the goods are installed in their home
Zero rate

Zero-rated means that the goods are still VAT-taxable, but the rate of VAT you must charge your customers is 0%. Examples of zero-rated goods include:

  • books and newspapers
  • children’s clothes and shoes
  • motorcycle helmets
You still have to record zero-rated transactions in your VAT accounts and report them on your VAT Return.

Rates can change and you must apply any changes to the rates from the date they change.

What you must do when charging VAT
 

You need to know the right VAT rate so you can charge it correctly and reclaim it on your purchases.

If a transaction is a standard, reduced or zero-rated taxable supply, you must:

  • charge the right rate of VAT
  • work out the VAT if a single price is shown that includes or excludes VAT
  • show the VAT information on your invoice
  • show the transaction in your VAT account - a summary of your VAT
  • show the amount on your VAT Return
You may be able to reclaim the VAT on purchases that relate to these sales.

You can’t claim back all of the amount you’ve paid if you pay the wrong amount of VAT on a purchase.

VAT-inclusive and exclusive prices
 

You’ll need to make a calculation when charging VAT on goods or services, or when working out the amount of VAT you can claim back on items which were sold inclusive of VAT.

VAT-inclusive prices

To work out a price including the standard rate of VAT (20%), multiply the price excluding VAT by 1.2.

To work out a price including the reduced rate of VAT (5%), multiply the price excluding VAT by 1.05.

VAT-exclusive prices

To work out a price excluding the standard rate of VAT (20%) divide the price including VAT by 1.2.

To work out a price excluding the reduced rate of VAT (5%) divide the price including VAT by 1.05.

When not to charge VAT
 

You can’t charge VAT on exempt or ‘out of scope’ items.

Exempt goods and services Exempt goods or services are supplies that you:

  • can’t charge VAT on
  • must not include in your VAT records
If you buy or sell an exempt item you should still record the transaction in your general business accounts. Examples of exempt items include:

  • insurance
  • postage stamps or services
  • health services provided by doctors

VAT registration

Businesses that sell only VAT-exempt goods and services don’t have be registered for VAT. If you start selling items that aren’t exempt, you can register for VAT voluntarily. You must register if the total value of non-exempt goods and services goes over the VAT taxable turnover threshold

Out of scope

Some goods and services are outside the VAT tax system so you can’t charge or reclaim the VAT on them. For example, out of scope items include:

  • goods or services you buy and use outside of the EU
  • statutory fees - like the London congestion charge
  • goods you sell as part of a hobby - like stamps from a collection
  • donations to a charity - if given without receiving anything in return

Charging VAT to charities
 

As a VAT-registered business, you can sell certain goods and services to charities at the zero or reduced rate of VAT.

It’s your responsibility to check the charity is eligible, and to apply the correct rate.

Community amateur sports clubs (CASCs) don’t qualify for VAT reliefs for charities.

Check the charity is eligible

To make sure the charity is eligible, ask them for:

  • evidence that they’re a charity
  • a written declaration or ‘certificate’ confirming they meet the conditions for the particular VAT relief
Evidence of charitable status

The charity should give you either:

  • their Charity Commission registration number
  • a letter of recognition from HM Revenue and Customs (HMRC) if they’re not registered with the Charity Commission for England and Wales (eg if they’re a Scottish or Northern Irish charity)
Written declaration

Charities are legally required to give you an eligibility certificate when you supply eligible building or construction services to them at zero VAT. The certificate must contain specific information.

A declaration is not legally required for other items you sell at the zero or reduced rate, but you should ask for one to prove the charity is eligible for the relief.

These sample declarations contain examples of the information a charity should give you when buying:

  • medical and scientific equipment, motor vehicles and computer software
  • charity advertising
  • goods and services for disabled people
The written declaration should be separate from the order form or invoice for the goods or services the charity is buying.

You must keep the completed declarations for at least 4 years.

Items that qualify for the reduced rate

You may be able to apply the reduced VAT rate when you sell fuel and power in certain circumstances to an eligible charity.

Items that qualify for the zero rate You may be able to apply zero VAT when you sell the following to an eligible charity:
  • advertising and items for collecting donations
  • aids for disabled people
  • construction services
  • drugs and chemicals
  • equipment for making ‘talking’ books and newspapers
  • lifeboats and associated equipment, including fuel
  • medicine or ingredients for medicine
  • resuscitation training models
Equipment for medical and veterinary use

You may also be able to zero-rate some other medical and veterinary equipment when you sell it to:

  • certain health bodies, eg NHS Trusts
  • not-for-profit research institutions
  • charities that provide institutional care, or medical or surgical treatment for chronically sick or disabled people
  • charities that provide transport services for disabled people
  • charities that provide rescue or first aid services to humans or animals
  • someone buying it specifically for donation to one of these bodies
The money used to buy the equipment must be from charitable or donated funds. This should be stated on the eligibility declaration.

The eligible items include:

  • medical, veterinary and scientific equipment
  • ambulances
  • goods for disabled people
  • motor vehicles for medical use<
  • rescue equipment
  • resuscitation training dummies

Returned goods
 

When you return goods to a supplier or a customer returns goods to you, the balance of payment can be settled by issuing either a:

  • replacement invoice
  • credit or debit note

If you exchange the goods for goods of the same value you don’t need to issue a new VAT invoice.

Credit and debit notes

These must show the same information as the VAT invoice and:
  • why it was issued
  • the total amount credited, excluding VAT 

  • the number and date of the original VAT invoice

Discounts and free gifts
 

Discounts

VAT may have to be charged on discounts and deals.

Offer How to charge VAT
Discounts Charged on the discounted price (not the full price)
Gifts Charged on the gift’s full value - there are some exceptions listed below
Multi-buys Charged on the combined price if all the items have the same VAT rate. If not, VAT is ‘apportioned’ as mixed-rate goods
Money-off coupons, vouchers etc No VAT due if given away free at time of a purchase. If not, VAT due on the price charged
‘Face value’ vouchers that can be used for more than one type of good or service No VAT due, if sold at or below their monetary value
Redeemed face value vouchers Charged on the full value of the transaction
Redeemed face value vouchers sold at a discount Charged on the discounted value of the transaction
Link-save offers (buy one get one free or discounted) VAT is apportioned as mixed-rate goods - there are exceptions

Exceptions for gifts and link-save offers

There’s no VAT due on gifts given to the same person if their total value in a 12 month period is less than £50.

VAT is charged on the combined value of link-save items if the incentive product:

  • has a resale value of less than £1
  • has a sale value of less than £5
  • costs you less than 20% of the total of the other items in the offer
  • isn’t sold at a separate price from the main product

Free goods and services

You don’t have to pay VAT on things like free samples if they meet certain conditions.

Supplies Condition to meet so no VAT due
Free samples Used for marketing purposes and provided in a quantity that lets potential customers test the product
Free loans of business assets The cost of hiring the asset is included in something else you sell to the customer
Free gifts The total cost of all gifts to the same person is less than £50 in a 12 month period
Free services You don’t get any payment or goods or services in return

Advertisements
Did you know...
We create opportunities, we keep our members informed, connect businesses and we are the 'voice' of manufacturing representing Calderdale & Kirklees.

News

5 results found 
Huddersfield chartered accountants play ball to raise money for charity

Monday 09 October 2017

Huddersfield-based firm Crowther Chartered Accountants held a social event at Huddersfield Lawn Tennis Club (HTLC) last month (Friday 29th September) to raise money for Forget Me Not Children’s Hospice and Macmillan Coffee Morning. Rallying together clients, business associates, partners and contacts, the day raised £840 from donations, a raffle and advertising opportunities. Commencing at 11.30am with coffee, attendees of all skill levels were then invited to play doubles tennis against each other, in a bid to clinch the ‘most outstanding player’ accolade. Other awards included ‘hardest working’, ‘noisiest’ and ‘smartest dressed’ players, to name a few. The full-day event marked one month since the appointment of business development manager David Busfield from HSBC. Michelle Crowther, business development director, said: “This was a really fun way to introduce David to our connections, socialise with new and existing associates and finish off the last of summer, while raising money for these fantastic charities. “Last year we also sponsored Kirklees and Calderdale Charity Lunch (KACCL) — the group which raises valuable funds for Forget Me Not Children’s Hospice. This event was another way for us to support them. And what better way to bring people together than on a tennis court with some food and fun games!” Jeremy Mills of Riley Dunn & Wilson clinched the top prize of best tennis player, with Crowther Accountants’ Kristian Lee taking second place. Tim Grimshaw — a business banking manager at HSBC — won ‘best entertainer’, after he dislocated his shoulder within five minutes of play. Jess Lees, corporate fundraiser at Forget Me Not Children’s Hospice said: “We are delighted that Crowther Accountants continually chooses to support our hospice. “They are a long-standing supporter of our charity and help to not only raise funds, but also awareness of the hospice across Huddersfield and Kirklees. We really value what they do for us!” Crowther Chartered Accountants provides accountancy, taxation and bookkeeping support to over 600 clients across Yorkshire and the rest of the UK. The firm has also just announced the recruitment of a business administration apprentice and an account manager.
Posted by Byram, Amy
Leading Huddersfield accountancy practice invites local businesses to get their thinking caps on for charity

Wednesday 06 September 2017

Sheards Annual Quiz Night Returns to raise funds for Kirkwood Hospice Sheards Accountancy’s annual quiz night is set to return on Thursday 12th October. Once again, the Sheards quiz master, Kevin Sanders, will create a brain-teasing quiz which will test the general knowledge of all those attending the event. The event will be in aid of local charity, Kirkwood Hospice, and will be held at the Waterloo Suite at Huddersfield RUFC from 6:30pm. Last year, thanks to the generosity and support from the local businesses that took part, over £740 was raised for The Town Foundation. Entry costs £50 for a team of 4 and will include a hot supper. There will also be a raffle on the evening to help raise more money for the fantastic work carried out by Kirkwood Hospice. Raffle donations are welcome. Kevin Winterburn, Director of Sheards Accountancy commented: “Our charity quiz night has become a popular event in the local business calendar and we are delighted to be able to host it once again this year. It will be our second fundraising event for Kirkwood Hospice, and we hope it will contribute to reaching our fundraising goal for this fantastic charity. We look forward to welcoming local businesses in what will surely be a night to remember." To book your place, please email Kevin Winterburn: kevinw@sheards.co.uk
Posted by Sheards Accountancy Ltd
Batley based haulage and storage companies bought out of administration

Friday 18 August 2017

Batley-based haulage solutions and storage companies have been acquired out of administration securing all 15 jobs. Charles Brook and Allan Cadman, insolvency practitioner partners at Poppleton & Appleby were appointed as the joint administrators of both companies on 10th August 2017. CIS Industrial Ltd and CIS Industrial Hire & Sales Ltd, both family businesses, have operated side by side dating back to the 1980s. They offer haulage solutions and storage facilities serving customers both locally and nationally from their premises in Birstall, Batley. Both Companies had suffered cash-flow difficulties in part caused by restrictive historic finance issues to the point where the companies were under imminent threat of being wound up through the Courts by HM Revenue & Customs. Immediately following Poppleton & Appleby’s appointment, the Joint Administrators undertook a ‘Pre pack’ sale of the business and assets of both companies, where the purchasers are the existing family management team. The deal saved the jobs of the workforce in its entirety and ensured the continuity of supply to their customer base. Joint Administrator, Allan Cadman, said “It is gratifying to be involved in such a matter particularly in a week where there has been a media spotlight on family-owned and run businesses. The deal not only saves the jobs of 15 people in the locality but provides continuity for customers and new opportunities for suppliers. The deal will ensure that the creditors’ position will be enhanced through this process as opposed to the winding up and shut down position which was narrowly avoided.”
Posted by Poppleton & Appleby Northern
Huddersfield-based Crowther Accountants strengthens management team with recruit from HSBC

Monday 14 August 2017

A former HSBC senior commercial banking manager has been appointed by Huddersfield-based Crowther Accountants as its new business development manager. David Busfield joins the firm’s 20-strong team with over 40 years’ experience in the banking industry. His role will see him generating new opportunities, working with existing relationships and managing sales activities. Starting his career with Midland Bank in 1976 — more latterly HSBC Group — he initially worked in the retail banking sector before moving into the commercial and corporate environment over 20 years ago. His career has seen him work in various roles, before being appointed to the senior commercial role five years ago. Throughout this time, he’s supported a wide variety of SME’s and corporate clients, covering both West and South Yorkshire. Whilst this is a new role created within the firm for David, he’s been an associate of Crowther Accountants for many years. He said: “In the past we’ve shared some of the same customers and I’ve always been impressed with the way Crowther do things. The team is extremely proactive, on-the-ball and quick to spot opportunities for clients. “So when this new role became available and I saw their plans for growth, I decided that I wanted to be part of it. I’m excited to be joining such a great team.” And David’s diary is already filling up with opportunities for the Crowther team – among both new and existing clients. Next month, the firm is hosting a social event at Huddersfield Tennis Club for Crowther Accountants’ clients, partners and contacts, as well as some of David’s own business and professional connections. Michelle Crowther, the firm’s business development director, added: “We’ve always had a fantastic working relationship with David — it’s been built on mutual integrity and trust over a number of years. He’s a very well respected member of the Leeds and Huddersfield business community and we know that he’ll be a great ambassador for the firm. “We’re delighted that he has joined us and, in fact, he’s already proved to be a brilliant addition to our team! His experience of dealing with small and medium enterprises across the region will only add to our reputation of delivering a first-class service to our clients.” Crowther Chartered Accountants provides accountancy, taxation and bookkeeping support to over 600 clients across Yorkshire and the rest of the UK. The firm is also set to further expand its team and is currently looking to recruit an accounts manager and has recently filled various trainee positions within the firm.
Posted by Byram, Amy
ABL Business expands into North Yorkshire

Wednesday 21 June 2017

Yorkshire-based business support consultancy ABL Business Ltd are expanding their operations into North Yorkshire. The company, which offers commercial finance and marketing support to SMEs, has engaged Fraser Irvine as an Appointed Representative to cover the county. Based in Harrogate, Fraser will be operating across the area, offering a full mix of commercial finance services. He will assist SMEs in raising the funds they need to trade, grow or stabilise their business, using all the funding lines and capabilities of ABL Business. It marks the third recent growth for the Cleckheaton-based company, who recently set up a new office in Scotland with two representatives just over a year ago and expanded into the North East region in March this year. Fraser Irvine is an experienced Independent Commercial Finance Broker and joins the company with an extensive career in financing businesses under his belt. He has spent almost 30 years working with asset and cash flow funders, which gives him a deep understanding of the financial needs of an SME business. Fraser has worked with new start businesses, as well as more established companies, arranging funding facilities to suit individual needs. His interest in business finance has also enabled him to gain extensive experience in the Management Buy-out, Management Buy-in and transactional market as a whole. He said: “I have known ABL Business and its owners, Andy Redman and Alex Beardsley for many years and really like the independent and client-focussed approach they adopt, so I’m very excited that I’m now joining the team. “ABL Business has access to a vast range of funders, which means I will benefit from being able to offer clients financial solutions that are tailored to bespoke needs. I am keen to help clients from new starts to multi-million turnover businesses to grow and achieve their full potential.” ABL Business Ltd and their appointed representatives have access to over 70 funders, enabling them to find an appropriate solution, no matter what a client’s financial requirements may be. ABL Business Director Andy Redman said: “We’re delighted to welcome Fraser to the team. He has a wealth of experience, which he brings with him from the financial sector, and in business too. Fraser, with his connections and knowledge, will be a real asset to ABL Business and to companies across North Yorkshire. His appointment has enabled us to expand our reach into yet another area and help even more businesses find funding packages that suit their specific needs”.
Posted by ABL Business Ltd
5 results found 
Designed by Kirklees Council
Built and powered by Alcium Software
Close cookie policy popup window
This site uses cookies for analysis purposes only. This helps us understand how you and other visitors use our site. To see a complete list of these cookies or to opt out please access our cookie policy page.

You will see this message only once, but you will be able to find more information about our use of cookies or opt out at any time.