Small business guide – understanding the VAT

Small business guide – understanding the VAT

As an entrepreneur you have a lot of doubts when you first establish your company, because you have to deal with certain situations, you might not know how to handle. There are many actions you have to take to meet the legal requirements, and the most important ones have in view paying taxes. And if there is no one to explain you what a French VAT number is, for example, you have to do some research by yourself, to be sure that you are informed. There are different guides online that offer you all the information you need, because in some cases you do not know where to start from. Below are some questions every small business entrepreneur might have, and their answers, so take your time to carefully read them, and understand what VAT is and how it works.

What is VAT?

Value Added Tax was introduced back in 1973, and it is designed as a tax added to the majority of services and goods by the companies, which provide them. The VAT is a large source of revenue for your country’s government, so this is why it is so highly important to apply it.

How does it work?

Because you have a small business, you would be able to charge only if you are registered for VAT. It is applied to the business goods that you might use for personal reasons, but also for the services and goods, you might sell or hire. All the items you are selling or hiring are considered as “taxable supplies”, and it is important to fully understand the terms used in this purpose. If you want to know exactly which one of them is a taxable supply and which not, you should take a look on the information provided by HMRC, because they have a dedicated page for this purpose. You would have no difficulties in understanding the details, because they are presented clearly.

Do you have to register your company for VAT?

You would have to do this action in case the annual turnover of your company exceeds £82,000, and you have to register for VAT in a month from the day you reach this number. However, you should know that not all the capital assets you have are included in the threshold, so you have to check which one of your exempt supplies is written on the list. If you consider that you should register for VAT, the simplest way to do it is online, because there you have access to a complete guide which helps you understand what you have to do.

Should you register for VAT if you do not need to?

In this case, there is no wrong or right answer to the question, because if you choose to do it, you would benefit from a lot of advantages, but if you consider that it is not the case for you, and your turnover is under £82,000, then you should not do it. Check the benefits and decide which is best for you.