You can only charge VAT if your business is VAT registered.
It can be charged on the following:
- Business Sales- when you sell goods and services
- Hiring or loaning goods someone
- Selling business items
- Commission
- Items sold to staff for example canteen meals
- Business goods used for personal reasons
- Non sales including part exchanges or gifts
VAT registered businesses must charge VAT on all of the goods or services that they sell. They may reclaim any VAT they’ve paid on business related goods or services. They must also file a VAT return which is usually due every 3 months. This details the amount of VAT you’ve charged and the amount of VAT you’ve paid. If the amount of VAT you have charged exceeds the amount of VAT you’ve paid, you have to pay the difference to HMRC. If you’ve paid more VAT than you have charged, you can reclaim the difference from HMRC.
You must charge the correct rate of VAT which is usually 20% though some items have a discounted VAT rate. You can find out more about this by following this link: https://www.gov.uk/vat-rates . To work out a price including the standard rate of VAT multiply the excluding price by 1.2. To work out a price excluding the standard rate of VAT divide the price including VAT by 1.2.
For prices which are discounted VAT ought to be charged on the discounted price rather than the full price. Prices that include money off vouchers no VAT is due if given away for free at the time of purchase, if they were not free VAT is due on the price charged.
Goods and services VAT exempt must not have VAT charged on them or be included in your VAT records. If you buy or sell an exempt item you should still record the transaction in your general business accounts. Examples of exempt items include- insurance, postage stamps or services, health services provided by doctors.
Businesses that sell only VAT exempt goods and services don’t have to be VAT registered. If you start selling items that aren’t exempt you must register for VAT within 30 days, otherwise you could face penalties.
For more information on VAT please follow this guide:
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