Even the longest trading businesses can sometimes get a bitmixed up when it comes to VAT. Charging VAT when it isn't due or charging the wrong rate are common mistakes when you offer new or different products to customers.
Andrew Keates urges all businesses to check. Are you charging the right amount of VAT on all goods and services to customers.
Businesses and Charging VAT
There are three different rates of VAT and you, as a business owner, need to ensure that you charge the right amount.
Standard Rate The majority of goods or services are charged with standard rate. Charge this unless your goods or services are classed as reduced or zero rated.
Reduced Rate Thisis a little more complicated as you charge this rate depending on the item being provided, but also depending on the circumstance of the sale. The following examples display this: Children's car seats and domestic fuel or power are always charged at 5%. Mobility Aids for older people can be charged at a 5% VAT rate, but only if they are for a person aged over 60 and the goods are installed in their home.
Zero Rate Zero rated means that the goods are still VAT-taxable, but the rate of VAT that you must charge your customers is 0%. Zero rated goods include, books and newspapers, motorcycle helmets and children's clothes and shoes. It is important to note that as Liverpool Accountants, Andrew Keates has seen mistakes happen where Zero rated VAT has not been recorded in VAT accounts. You must record it and report it on your VAT return.
Determining your VAT
Different goods and services have different VAT rates, so please consider is who buying them, where they are provided, how they are presented for sale, the precise nature of the goods or services and whetherthey are provided with other goods and services. Other conditions may also apply.There are different rules regarding VAT for certain trades, These can all affect how you account for VAT and how much VAT you must pay and can reclaim.
For example, the food and drink industry alone, has some variation. For human consumption, food is generally zero tax rated. Yet,alcoholic drinks, sweets, confectionary, crisps, soft drinks, amongst othersare taxed at the standard rate.
Furthermore International Trade Goods exported outside the EU or sent to someone registered in another EU country are zero rated subject to conditions. You can read more about VAT on goods sent overseas, and access and extended list of goods or services in different fields and their VAT rates on this link. https://www.gov.uk/rates-of-vat-on-different-goods-and-services