How Does VAT Work

How VAT is Calculated

A business must register for VAT when its annual sales pass the HMRC threshold (£81,000 - fiscal year 2014 / 2015.)

The tax is added to sales; (output vat) and paid on the purchase of goods and services (input vat). The difference between output and input vat is the value of the tax payable to HMRC, who will refund this difference if input is greater than output.

The VAT Return

Value added tax is payable quarterly. You are allowed one month's grace to both submit the return and pay the vat. For example if a vat quarter starts at the beginning of January, the vat return and payment must be made by no later than the end of April. All Vat returns are required to be completed online.

VAT remittances can also be made online. If you choose to pay by post you will need to submit your return and send a cheque early enough to ensure that HMRC will have cleared your payment by the deadline. Late clearance will represent a late payment, which may result in a surcharge.

Transaction Dates

The day you issue an invoice is known as the tax point. That will also appear on invoices from suppliers.

Your liability for output VAT starts from the date of the tax point. You have to account for all VAT transactions regardless of whether or not the cash for them has been collected / paid.

Figurewizard and VAT

All information entered into our forms are made excluding VAT, with the sole exception of the purchase or sale of company cars as the VAT cannot be reclaimed for these. Our system calculates and applies all other VAT transactions, including the value of quarterly remittances to HMRC.

Figurewizard and Import VAT

There is no VAT payable on imports between EU members. VAT is payable on importation on imports into the UK from outside the EU. This is also calculated and applied by our system.

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