VAT and your business

 

All UK businesses must have a through working understanding of VAT, as it permeates many of a business’s day to day transactions.
VAT (Value Added Tax) solicitors usually work for small businesses calculating the amount of VAT that business needs to pay to HMRC (Her Majesty’s Revenue & Customs) or get from HMRC.

What is VAT?

VAT is legally defined in the Value Added Tax Act 1994 as being charged on ‘any supply of goods and services made in the United Kingdom where it is a taxable supply made by a taxable person’.

A taxable supply is basically the supply of goods and services and is quite broadly defined so that more goods and services can be taxable. A taxable person is someone who is VAT registered.

How is VAT charged?

Generally, VAT is charged whenever a business supplies goods or services. The business charges the customer VAT at a percentage of the value of the goods or services.

This VAT is known as output tax. For VAT solicitors to work out what a business’s output tax is, they just need to calculate the VAT charged to customers on sales.

A business will have often paid VAT on goods or services, for example when buying raw materials - this is known as input tax. When VAT solicitors are instructed to work out the VAT a business should pay, they must deduct the input tax that has been paid from the output tax and the residual tax is the amount the business owes to HMRC.

It is perhaps worth noting that the business itself is not paying the VAT, but simply collecting it as it sells its goods or services. If you are unsure as to any area of tax law, it is always advisable to contact a specialist solicitor to avoid fines or, in extreme cases, imprisonment.
If you would like more information on tax law firms, visit our further information page.

Do you need a VAT specialist to help you file your end-of-year tax return? Contact Law can put you in touch with a specialist to help your business run as smoothly as possible. Please call us on 0800 1777 162 or complete the web-form above.

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