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Registration threshold

You must register for VAT if your VAT taxable turnover in the last 12 months, or next 30 days, is over


> £85,000

From 1.4.2018

> £85,000

VAT taxable turnover is total sales and certain other supplies you make that are subject to VAT. It includes goods/services that are zero rated, but excludes goods and services that are exempt from VAT.

De-registration threshold

If your VAT taxable turnover for the year or next 12 months is less than or equal to

< £83,000

< £83,000

You can either stay registered, or ask HMRC for your VAT registration to be cancelled explaining why your turnover has fallen, and giving an estimate of your turnover for the next year.

Acquisitions from EU countries

You may have to register and account for VAT if you acquire goods (not services) from other EU countries and their total value is over

> £85,000

> £85,000

Registration applies if at the end of any month, the total value of your acquisitions from all other EU countries in the year, or part of the year, from 1 January exceeds £85,000, OR you estimate that these will exceed £85,000 in the next 30 days alone. You can de-register if the total falls below £83,000, unless you still need to be registered on your UK taxable turnover.

EC Sales List (ESL)

If you make supplies of goods to VAT registered traders in other EU countries, either yourself or through a supplier direct to a customer in the EU, you must complete an ESL.

You can apply to HMRC for permission to submit a simplified annual ESL provided 3 conditions are met - your annual VAT taxable turnover is less than the VAT threshold+£25,500, the annual value of your supplies to other EU countries is not more than £11,000 and the supplies do not include New Means of Transport.

You need to complete an ESL showing each of your customers in the EU and the sterling value of each type of supplies made to them. As there is no threshold for ESLs, you must list every supply, no matter how small. If there are no supplies or any credit notes in the reporting period, you do not need to submit an ESL.


Rates of VAT

Standard rated

20% or 1/6 of the consideration received for making a supply.

Zero rated/exempt

0% - generally export sales and food and drink for human consumption and health.

Reduced rate

5% or 1/21 of the gross receipt - generally heating and lighting for non business use.

Flat rate

16.5% for limited cost traders or a range of flat rate percentages depending on business sector.


Criteria for use

Cash accounting scheme - you pay VAT only when your customer pays you but reclaim VAT only when you have paid your suppliers.

You can use the cash accounting scheme if your estimated turnover for the next tax year is no more than £1.35 million. You can keep using this scheme until your turnover exceeds £1.6 million.

Annual accounting scheme - you complete one VAT return per year and make VAT payments on account.

To use the scheme, the same turnover criteria apply as for cash accounting and you make 9 monthly, or 3 quarterly, interim payments during the year with a final payment or refund at the end of the year. Also, you only complete one VAT return for the year.

Flat rate scheme - you pay VAT based on a % of your total VAT inclusive turnover. You cannot combine this scheme with the cash accounting scheme.

To use this scheme your VAT taxable t/over (ex VAT) should not, in the next tax year, be more than £150,000. You cannot use the scheme once your total business income exceeds £230,000. You can combine this scheme with annual accounting scheme.

Retail schemes - for retailers who cannot account for VAT in the normal way.

A retail scheme can be standard or bespoke depending on turnover. Under a standard retail scheme, VAT on sales is worked out using point of sale, direct calculation or apportionment method. If T/O > £1m ex VAT, different methods apply.