Biz Tips: VAT Compliance Simplified
GROWTH:
VAT Compliance Simplified
If you’re a budding business owner, you may have heard such buzzwords as VAT, VAT compliance, or the more frightening one — non-compliance penalty. In this article, we set out to explain in the simplest of terms what VAT is, its compliance rules, and whether or not you should apply for it.
By the end, you will have a clear image of what you’re facing.
What Is VAT?
VAT is short for value-added tax. It is a relatively new type of tax, established in the 70s, but one that has become a big part of our everyday life.
With the ordinary sales tax, the tax is paid when the product is sold, only once. With VAT, the tax is paid each time the product is handed over to the next person in the distribution chain, from the manufacturer to the consumer.
However, each of those parties can get a reclaim on the VAT they paid, except for the consumer.
Who Needs to Pay?
Value-added tax was incorporated when the UK joined the European Union. All EU countries must comply with it, and each country has its own rules and regulations that make the compliance process a wholly different experience depending on where you are.
As for eligibility, companies that have a taxable turnover of £85,000 are obligated to apply for VAT compliance. Smaller companies and self-employed parties that have a smaller turnover, but still want to reclaim their VAT, can apply of their own free will.