VAT Explained

Most things you buy from the majority of retailers include a VAT charge. This is due to those retailers or business’ being registered for VAT with HMRC and they are required by the government to include it on most services and goods.

But what exactly is VAT, who pays it & why?

VAT is a tax added to the value of most things you buy, both goods & services at a rate set by HMRC (currently 20%). VAT is collected from you by any business who is registered for VAT and paid to the government. VAT does not result in a business paying more tax.
Business’ will collect VAT from its customers and also pay VAT on what they buy. The difference between those amounts is either paid to or collected from the government by that business.

So how might this affect you your business?
Firstly HMRC require any business with VAT taxable turnover of more than £83,000 per year to register for VAT. If your business turnover (the total amount of money earned by your business in one year) reaches this amount then VAT registration is compulsory. Regardless of your business turnover you can voluntarily register for VAT. You will have certain responsibilities if you register for VAT.

Once your business is registered for VAT then you must charge VAT on top of the price of any goods or services your business supplies its customer. The current rate of VAT is 20%. Therefore you must add 20% to each invoice you submit to One Motion and each invoice must also display your VAT registration number.

There is an alternative VAT scheme known as the flat rate scheme whereby you simply pay HMRC a percentage of the total of your business’ turnover including VAT for that period, this scheme is designed to minimize paperwork for small business’. The percentage you will pay depends on the main nature of your business and you will also receive discount on that percentage for your first year that you are registered for VAT.