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VAT LIMITS & THRESHOLDS


Notes


Registration threshold

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


From1.4.2021


> £85,000


From 1.4.2020


> £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.

EORI NUMBERS – ECONOMIC OPERATOR REGISTRATION AND IDENTIFICATION

1. From 1.1.2021, If a business imports or exports goods, it needs an EORI Number. This number usually starts with GB.

2. EORI numbers are only applicable to supplies of goods and do not apply to services.

3. There are UK EORI numbers and EU EORI numbers. An EU EORI number is needed in an EU country by a UK business if it has a branch in another EU country and imports stock into that country. An EU EORI number is valid in all EU countries, but a UK EORI number will only be applicable to imports and exports to/from UK.

5. An application for a UK EORI number can be made online at  https://www.gov.uk/eori

6. If you move goods to/from Northern Ireland you will need an EORI number that starts with X1, unless you have an EU EORI number. To get an EORI number that starts with X1 you must already have an EORI number starting with GB.

POSTPONED ACCOUNTING

1. VAT will no longer be paid when the goods arrive in the UK from EU and other countries for a VAT registered business. Instead, VAT will be declared and claimed on the subsequent VAT return. This is postponed accounting for VAT. Postponed accounting will apply to all goods from anywhere in the world from 1.1.2021.

2. An importer that is not VAT registered will continue to pay VAT when the goods come into the UK.

3. The postponed VAT will be declared in Box 1 (value x 20% outputs) and the same amount claimed in Box 4 of the next VAT return submitted by a business. The net payment for the goods plus the duty will be declared in Box 7 inputs box.

4. To claim VAT in box 4, the same input tax tests are required as for a normal UK purchase invoice, adjusted for exempt, non-business and private use.

5. From 1.1.2021, only 6 boxes will be relevant for businesses based in GB. Boxes 2, 8 and 9 will not be relevant except for businesses based in N. Ireland who will continue to make EU acquisitions and dispatches as part of the N. Ireland Protocol.

VAT RATES

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%/12.5% - generally heating/lighting non business use+ tourism &hospitality sector to 30.9.21/31.3.22.

Flat rate

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

VAT ACCOUNTING SCHEMES

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 taxable 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 gross turnover 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.

VAT