VAT

VAT registered businesses

• must charge VAT on their goods or services

• may reclaim any VAT they’ve paid on business-related goods or services

Business must register to pay VAT if their VAT taxable turnover exceeds the threshold (£85,000 in 2021-2022).

Learn more at https://www.gov.uk/vat-businesses.

There are three main rates:

• standard (currently 20%)

• reduced (applies in limited circumstances, such as certain disability aids, currently 5%) and

• zero (again, applies in limited circumstances, and details must still be included in your VAT return).

Some transactions are 'out of scope', such as statutory fees and donations to charity. Others are 'exempt', such as insurance, postage stamps and health services provided by doctors. Here's a list of VAT rates on different goods and services.

For certain goods / services, and with the right documentation in place, you may not need to charge VAT to a charity. Find out more at gov.uk.

A temporary reduced rate of 5% applies to eligible supplies until 30 September 2021, followed by a reduced rate of 12.5% until 31 March 2022. Further details are available at gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions.

This information is subject to change from 1 January 2021

Goods from the EU

You can include VAT paid on goods purchased from the EU in your VAT return. The VAT is known as 'acquisition tax' and you can normally reclaim this if the acquisitions relate to VAT taxable supplies that you make.

If you make substantial purchases from the EU each year you may need to complete and Intrastat Supplementary Declaration.

Find out more about VAT and imports from the EU at gov.uk.

Goods from outside the EU

You can reclaim VAT paid on most goods you've imported from non-EU countries on your VAT return. You'll need the import VAT certificate (form C79) to do this.

Find out more about VAT and imports from outside the EU at gov.uk.

Services from overseas suppliers

When you buy services from an overseas supplier, you may have to charge yourself VAT and also claim it back. This is known as a 'reverse charge'. It assumes that you are based in the UK, the supplier is in a different country, and that the service is covered by the general rule for place of supply of services.

This is a complex area of tax - please ask us for advice if you are planning to buy services from an overseas supplier.

Find out more about VAT on services from overseas suppliers at gov.uk.

Help with VAT on imports

Ask us if you'd like specialist help with VAT on imports.

Digital records

Using DEXT and Xero helps you meet the VAT record keeping requirements, however please note our guidance on keeping VAT fuel receipts to support business mileage claims. Records can be kept digitally.

Invoice

The default invoice style in Xero meets the invoice requirements for the VAT scheme. If you are providing invoices or receipts through an alternative system, such as an ePOS or online marketplace, check they meet these requirements.

Ask for VAT invoices or receipts for purchases your business and employees make on your behalf.

Tax point

Raise invoices within two weeks of the date you supplied your goods / services to meet ensure they show the correct tax point.

Name, address and registration / VAT numbers

Check your organisation settings includes your company name, registration number and address to ensure they show correctly on your invoices. (Go to your organisation name > Settings > Organisation details). You'll also need to include your VAT number (Go to Accounting > Advanced > Financial settings).

Xero prepares your VAT return and calculates the VAT due automatically based on the rates you use in your invoices, bills and receipts. (Find out more about how VAT works in Xero on Xero Central).

Specific rates are available to enable you to account for Domestic Reverse Charge where applicable. (Under Domestic Reverse Charge, customers receiving specified services pay the VAT to HMRC, instead of the supplier. Domestic Reverse Charge will be introduced for certain building and construction services in March 2021).

You'll find your latest VAT Returns in Xero under Accounting > Reports > Vat returns.

For most businesses, their VAT bill is due one month and 7 days after their VAT quarter end. For instance, if your quarter is from April to June, you'll need to pay by 7 August.

The easiest way to pay is by Direct Debit. To pay by bank transfer you should provide your VAT registration number as your reference.

You will need your Effective Date of Registration for VAT to enable us to become your VAT agent.

If you have a government gateway account, go to:

• https://www.gov.uk/log-in-register-hmrc-online-services

• Business Tax Account

• Manage your VAT account

• View VAT certificate

• You'll see your Registration Date

If you cannot do this, complete HMRC's online form:

• https://www.tax.service.gov.uk/shortforms/form/OSHVATEDR