Registered businesses charge Value Added Tax (VAT) on their sales.
This is known as output VAT and the sales are referred to as outputs.
Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
There are three rates: standard which applies to most goods and services, reduced rate for some goods and services such as home energy and zero rate goods and services, for example, most food and children's clothes.
Some supplies are exempt from VAT for example postage stamps, financial and insurance transactions.
A business is required to register for VAT if the value of taxable supplies exceeds the annual registration limit.
* 12.5% for hospitality and tourism from 1 October 2021 to 31 March 2022.
Annual Registration Limit (1.4.22 to 31.3.23): £85,000
Annual Deregistration Limit (1.4.22 to 31.3.23): £83,000
If you are in the Lancashire area and are looking for support and advice from a team of professional accountants and business advisers, contact Coates & Co.