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.

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.

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.

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.

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.