The VAT, or Value Added Tax, is a tax that is added to the majority of goods and services sold by VAT-registered businesses. If an organisation’s VAT taxable revenue exceeds £85,000, the entity must register for VAT. They can also register even if their yearly income is less than £85,000. As a VAT-registered business, you must perform the following:
- Include the proper amount of value-added tax (VAT) in every product and service price.
- You must keep records of how much VAT you pay for items purchased for your firm and account for VAT on any products imported into the UK.
- Report the amount of VAT charged to your customers and the amount of VAT paid to other companies by filing a VAT return to HM Revenue and Customs (HMRC) – normally once every three months pay any VAT you owe to HMRC Keep track of how much VAT you pay for items you buy for your business’s VAT account.
- The VAT that you must pay is frequently determined as the difference between the VAT that you have paid to other businesses and the VAT that you have charged your customers.
If you collected more VAT from your consumers than you paid in, you must make up the difference with HMRC. If you have paid more in VAT than you have collected from clients, HMRC typically pays you the difference.