VAT

VAT is a tax on consumer spending.

The important issues in order to comply with the VAT legislation are:

• the type of supply: if it is a taxable supply or an exempt supply
• the tax point
• partial exemption: what amount of tax the business can recover?
• tax invoices: information to be shown in order to be considered a valid tax invoice
• Record keeping for VAT purposes
• Late registration penalty
• Misdeclaration penalty
• Default surcharge
• Control visits, appeals and assessments
• Land & Buildings: zero rate supply, standard rate or exempt?
• International Aspects of VAT: when a company supplies goods or services to customer in another EC country or outside the EC.

Registration

There are two types of registration:

• Compulsory registration. If your annual turnover limits in the last 12 months or in the next 30 days exceeds £68,000 per annum from 1 May 2009.
• Voluntarily registration

The deregistration threshold is £66,000, from 1 May 2009.

Taxable supplies

There are three types of taxable supply: standard rate at 17.5%, lower rate at 5% and zero rate at 0%.

NEWS

On 24 November 2008 the Chancellor announced that the standard rate of VAT will be reduced to 15% on 1 December 2008.

Any sales of standard-rated goods or services that take place on or after 1 December 2008 providers should charge VAT at the new rate of 15%.

The 15% rate will remain until 31st December 2009, and from 1 January 2010 it will revert to 17.5%.