Let me ask you a question. “Is VAT easy or difficult to understand?”
There are so many different aspects to think about and probably the easiest part of VAT is registering for it and claiming back the tax you have been charged when buying goods for your company – but then it gets complicated. Once you’ve registered do you know when you have to start charging VAT to your customers? Or when you have to send your tax returns to HM Revenue & Customs? Do you know which goods are charged at 20% compared to those that are charged 0% or are exempt? Believe me there is a very long list of exemptions. And if that doesn’t sound like hard work there are pages of clauses and legislation you must abide by – do you know which ones apply to you?
Remember the Jaffa Cake incident? Under UK tax law biscuits and cakes are deemed as necessities and are not subject to VAT. Chocolate covered biscuits however are luxury goods and taxed at 20%. This forced McVities to go to a tribunal and prove that Jaffa Cakes are cakes and they did. And did you know that toasted sandwiches are fixed with a 20% tax charge but toasted bagels and baguettes are taxed at 0%. I’m not quite sure I understand the logic here but it takes me back to the question I asked at the start.
Like most taxes we have a duty to pay so on this occasion I’m going to suggest you seek professional help from a qualified accountant – I’m not trying to toot my own horn here but it’s common sense if you’re running a business. They know the rules and regulations associated with VAT and can make your life so much easier – and trust me when I say they understand VAT much better than you, it’s their job to know.
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AIMS Accountants for Business are the largest independent association of professionally qualified accountants in the UK specialising in accountancy for small, local and independent businesses. AIMS are no ordinary accountants and we are more than just number crunchers!