England Limited

Value Added Tax

Will your company pay Value Added Tax monthly or quarterly to HM Revenue and Customs for its sales?
  1. Taxation
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  3. Value Added Tax



It is the standard VAT rate determined for the products and services that are reduced and exempted.




It is a discounted VAT rate for the sales of books, certain foods, children's clothing and transportation services.




Businesses with an annual turnover of less than £85k are exempt from Value Added Tax.


What is Value Added Tax?

Technically, Value Added Tax is a type of tax that your customer, not your company, pays to the government. However, you collect this tax from your customers on behalf of the government and return the collected taxes to the government in a monthly or quarterly period.

How to be exempt from Value Added Tax?

If your company's annual turnover will not exceed £85k, you will be exempted from Value Added Tax. Thus, you will not reflect VAT on your invoices, and you will not return VAT on a monthly or quarterly basis.

When will I pay Value Added Tax?

If your company's annual turnover has exceeded £85k or you anticipate it will soon, you must first apply for a VAT Number. AOnce your VAT Number is assigned by HMRC, you should then reflect VAT on your invoices and return VAT to HMRC monthly or quarterly.

How is the Value Added Tax rate determined?

The Value Added Tax system, known as simply VAT, is divided into three parts: standard VAT of 20%, reduced VAT of 5% and VAT of 0% that are not subject to VAT. 5% VAT applies to many products such as heating projects, smoking cessation products, health products, energy saving products, child car seats. It applies to products such as books, newspapers, magazines, certain foods, children's clothing and shoes, transportation services. A standard VAT of 20% is applied to all products and services outside these categories.

Can I voluntarily pay Value Added Tax?

Certainly! Even if your company's annual turnover will not exceed £85k, you can return Value Added Tax by applying for a VAT number to HMRC. In this way, your company will gain prestige with its VAT number.

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