Vat

The general rule about liability to register for VAT is given in the VAT office notes. It is possible to give here only a brief outline of how the tax works. The rules that apply to the construction industry are extremely complex and all traders must study The VAT Guide and other publications.

Registration for VAT is required if, at the end of any month, the value of taxable supplies in the last 12 months exceeds the annual threshold or if there are reasonable grounds for believing the value of the taxable supplies in the next 30 days will exceed the annual threshold.

Taxable supplies include any zero-rated items. The annual threshold is £64,000. The amount of tax to be paid is the difference between the VAT charged out to customers (output tax) and that suffered on payments made to suppliers for goods and services (input tax) incurred in making taxable supplies. Unlike income tax there is no distinction in VAT for capital items so that the tax charged on the purchase of, for example, machinery, trucks and office furniture, will normally be reclaimable as input tax.

VAT is payable in respect of three monthly periods known as 'tax periods'. You can apply to have the group of tax periods that fits in best with your financial year. The tax must be paid within one month of the end of each tax period. Traders who receive regular repayments of VAT can apply to have them monthly rather than quarterly. Not all types of goods and services are taxed at 17.5% (i.e. the standard rate). Some are exempt and others are zero-rated.

0 0

Post a comment