VAT stands for Value Added Tax and, on the face of things, can seem incredibly confusing. It is a tax that is added to many services, supplies, products and goods, and if you are self-employed you may need to apply to be VAT registered.
When filling in your Vat registration form though, you may come across some terms which you don’t understand. If this is the case, use this jargon buster to help you along:
Goods that you brought into the UK from other countries that are located within the EU (European Union) are counted as acquisitions.
When you ship goods to another country within the EU they are referred to as despatches.
Sending goods to countries outside of the EU are exports.
If you bring goods into the EU and to the UK from a non-EU country, they are believed to be imports.
Input Tax refers to the tax (VAT) which you pay on purchases. This could include any supplies, products, goods or services which you require for the running of your business.
This is the VAT which you charge on the supplies, products, goods or services within your business, and is what your customers will pay to you.
If you ask your customers to issue you with a VAT invoice for the products which they have received from you, this is seen as self-billing. They will send their invoice along with their payment so that you can receive everything together.
If you supply, this means that you provide the public with some form of goods or services, in which case you may be eligible for VAT.
You are a taxable person if you own a business which buys and sells goods that are eligible for VAT. There are however some products which will not be eligible for VAT.
Your taxable turnover will be the full amount of money which you earn within one year. This does not include any capital items which you own, such as real estate or vehicles for your business.
This is the amount of time which your VAT Return covers – it usually amounts to a quarter of the year.
This is the point at which you must account for VAT and usually begins as soon as goods exchange hands, or you send them onto a customer. If you provide a service, you must account for VAT once the service is complete.
There is a lot of jargon used when talking about VAT, which is why it’s so important to understand as much of it as possible.
This article was provided by Aurora Johnson on behalf of Nixon Williams, a company offering accountants for interim managers and freelancers.