Overview of VAT

1. Accounting for VAT

1.1. Notify HMRC if value of taxable supplies exceeds registration threshold

1.2. Record output and input tax on supplies

1.3. Submit VAT returns to HMRC online

2. Control and enforcement

2.1. Registered business issued with unique VAT registration number (VRN)

2.2. Points based penalty for late submission of VAT returns

2.3. Businesses responsible for accuracy of returns

2.4. Periodic HMRC visits to ensure accuracy and honesty

2.5. Penalties and interest for under declaration of VAT liabilities

2.6. Dishonest trader could face imprisonment

3. Partial exemption

3.1. Where a business makes both exempt and taxable supplies

3.2. Can reclaim VAT on taxable supplies

3.3. Cannot reclaim VAT on exempt supplies

3.4. Apportion 'residual input tax' used for making both taxable and exempt supplies

4. Scope of VAT

4.1. Taxable supplies of goods and services, in the UK, in the course of business

4.2. Import of goods to the UK

4.3. Acquisition of goods in NI from elsewhere in EU

4.4. Movement of goods from GB to NI

4.5. Imports of services

5. Rates

5.1. 20% standard rate

5.2. 5% reduced rate

5.3. 0% zero rate

6. Exempt supplies

6.1. Not taxable supplies

6.2. No VAT charged

6.3. Business making only exempt supplies can not register for VAT or recover VAT incurred

7. Taxable supplies

7.1. Supply that is not an exempt supply

7.2. Taxable persons making taxable supplies charge VAT at appropriate rate

7.3. 20% standard rate unless zero or reduce rated supply

7.4. Zero rating takes priority over exemption