Whether you are registering for VAT because you have reached the annual VAT threshold or you are doing it voluntarily, you must fill out VAT1 form. You can choose between submitting it online or downloading a copy, filling it and posting it to HMRC . The earlier is an easier and quicker option with complete screen to screen guidance. There is also a confirmed online notification that let’s you know the tax man has received your application.
What is VAT and VAT 1 Form?
Value Added Tax (VAT) is a tax applied to purchase of goods and services. What differentiates it is that VAT is collected by businesses/individuals who sell these goods or services on behalf of HMRC. If your business has a turnover greater than £85,000, you must register by filling out a HMRC VAT1 form. The tax man prefers you do it online. The standard tax rate is 20% but there may be other tax rates applicable to different circumstances and categories of goods or services.
Each company will have to assess the VAT it pays and the VAT it collects. If it pays more, it can reclaim from HMRC. Subject to certain eligibility criteria, you can even reclaim for periods before you even registered. If you have collected more than you have paid, you have to pay the difference to HMRC. Either way you need to submit the totals for collected and paid by filling out the VAT1 form.
What are different VAT schemes?
As stated, standard VAT rate is 20%. There are other schemes also that may be applicable to your company. Subject to certain conditions, you can choose to operate a flat rate scheme. You will pay a flat rate to HMRC rather than accounting each transaction separately. Cash only scheme will allow you to pay only when you have received the actual cash as opposed to an invoice. The HMRC website describes different schemes and their criteria.
What happens when you register for VAT via VAT 1 Form?
Typically HMRC takes a month period of time to process VAT registration application. However, in some cases, companies have had to wait longer. Complex that it may sound, you become liable to pay VAT the day you hit the threshold. So till you get the VAT number, you are advised to charge additional prices by 20%. And you have to inform your customers that you will issue VAT invoices once you get the number!
We have briefly summarized what is VAT, what is VAT1 form, how to register and what happens once you register. For further help, you can contact Certax Fitzrovia Ltd. We are reliable VAT consultants and can help do tedious VAT calculations for you.
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