VAT Rights
Written in plain language for general understanding. This is educational content, not legal advice. Based on UK Acts of Parliament, statutory instruments, and official guidance.
UK National Law
What is this right?
Value Added Tax (VAT) is a tax on goods and services. If you run a business, you need to understand when and how to register:
- You must register for VAT if your taxable turnover exceeds £90,000 in the past 12 months (or you expect it to in the next 30 days alone).
- You can voluntarily register below this threshold — useful if you want to reclaim VAT on purchases.
- The standard VAT rate is 20%. Some goods are at 5% (e.g., home energy, child car seats) or 0% (e.g., most food, children's clothing, books).
The Flat Rate Scheme lets smaller businesses (turnover under £150,000) pay a fixed percentage of turnover, simplifying record-keeping.
When does it apply?
- You run a business, trade, or provide services in the UK.
- You must monitor your turnover — crossing the threshold without registering can result in penalties and backdated VAT.
- If you buy goods from the EU above certain thresholds, different rules may apply post-Brexit.
- Some businesses are exempt — health services, education, insurance, and finance are VAT-exempt.
What should you do?
- Register for VAT online through your Government Gateway account — you have 30 days from exceeding the threshold.
- Keep detailed VAT records — invoices, receipts, and a VAT account showing the difference between VAT charged and VAT paid.
- File VAT returns quarterly (usually) through Making Tax Digital (MTD)-compatible software.
- If you disagree with a VAT assessment, you can appeal to the First-tier Tribunal (Tax) within 30 days.
What should you NOT do?
- Don't ignore the registration threshold — HMRC can backdate your registration and demand VAT for the entire period you should have been registered.
- Don't reclaim VAT on non-business expenses — only VAT on genuine business purchases can be reclaimed.
- Don't miss your VAT return deadlines — late returns trigger a default surcharge, which increases with each late return.
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