VAT registration & returns: businesses (both limited companies and sole traders/self-employed) with turnover of £85,000 or over (current threshold) must register for VAT and submit their VAT returns online to HMRC on or before the deadline. The VAT returns can be filed monthly, quarterly or yearly. The deadline for filing VAT returns is one month and seven days after the end of the VAT month or quarter or year (for a month or quarter ending 31 March 2019, the deadline for filing the VAT returns is 7 May 2019). The deadline for VAT payment is the same as the submission date with the exception of Direct Debit payment which receives 3 extra days. There are various VAT scheme for VAT returns to be prepared and submitted:
- Standard VAT scheme: with this scheme, the VAT return prepared is based on the input VAT that the businesses charge their customers and the VAT they pay their suppliers. The difference is a VAT to be paid to or a refund received from HMRC
- Flat rate scheme: with the flat rate scheme, the VAT to be paid to HMRC is calculated by multiplying the business gross sales by a percentage specified by HMRC. The percentage used will depend on an industry that the business is in. There will be no VAT refund from HMRC for businesses that use flat rate scheme because any VAT paid to suppliers cannot be reclaimed
- Cash accounting scheme: with this scheme, businesses only pay VAT on their sales after they receive payments from their customers and can reclaim VAT after their suppliers are paid
- Annual accounting scheme: with this scheme, businesses will file their VAT returns once a year but pay their VAT bills in advance based on the previous year VAT return. The VAT paid to or refund received from HMRC is the difference between the advance payment made and the actual VAT submitted
Businesses whose turnover is less than £85,000 can register for VAT voluntarily. This can be useful as the business can reclaim the VAT paid to their suppliers.