Tag Archives: VAT-small-business

VAT: Top 10 Tips for small businesses and start-ups

By   8 December 2025
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VAT Basics
At some point it is likely that a small business or start-up will need to consider VAT. Here are a few pointers:
  1. Should you be registered for VAT?

If your income is above £90,000 pa of taxable supplies, you have no choice. But you can voluntarily register if below this threshold. There are significant penalties for failure to register at the correct time.

  • Advantages of VAT registration: VAT recovery on expenses plus, perhaps; gravitas for a business
  • Disadvantages: administration costs plus a potential additional cost to customers if they are unable to recover VAT charged to them (eg; they are private individuals) which could affect your competitiveness

More here

  1. Even non-registered businesses can save VAT
  • Look to use non-VAT registered suppliers, or non-UK suppliers (however, this may count towards your registration turnover)
  • If you are purchasing or leasing commercial property, consider looking for non-opted property or raise the issue of your inability to recover VAT in negotiations on the rent
  • Take advantage of all zero and reduced rates of VAT reliefs available
  • Challenge suppliers if you consider that a higher rate of VAT has been charged than necessary
  1. Consider using the appropriate simplification scheme 
  • Flat Rate Scheme (1% discount in first year of registration)
  • Cash Accounting (helps avoid VAT issues on bad debts)
  • Annual Accounting (can generate real, cash flow and/or administrative savings)
  • Margin schemes for second-hand goods

Further details here and here

  1. Make sure you recover all pre-registration and/or pre-incorporation VAT

VAT incurred on goods on hand (purchased four years ago or less) and services up to six months before VAT registration is normally recoverable.

  1. Are your VAT liabilities correct?

Many businesses have complex VAT liabilities (eg; financial services, charities, food outlets, insurance brokers, cross border suppliers of goods or services, health, welfare and education service providers, and any business involved in land and property). A review of the VAT treatment may avoid assessments and penalties and may also identify VAT overcharges made which could give rise to reclaims. Additionally, these types of business are often restricted on what input tax they can reclaim. Check business/non-business apportionment and partial exemption restrictions.

More on charities here

  1. Have you incurred VAT elsewhere outside the UK?

You may be able to claim this from overseas tax authorities. Details here

  1. Do you recover VAT on road fuel or other motoring costs?

Options for VAT on fuel: keep detailed records of business use or use road fuel scale charges (based on CO2 emissions)

If you need a car; consider leasing rather than buying. 50% of VAT on lease charge is potentially recoverable, plus 100% of maintenance if split out on invoice.  VAT on the purchase of a car is usually wholly irrecoverable.

More here

  1. Remember: VAT on business entertainment is usually not recoverable but VAT on subsistence and staff entertainment is. 
  1. Pay proper attention to VAT
  • keep up to date records
  • submit VAT returns and pay VAT due on time (will avoid interest, potential penalties and hassle from the VAT man)
  • claim Bad Debt Relief (BDR) on any bad debts over six months old
  • contact HMRC as soon as possible if there are VAT payment problems or if there are difficulties submitting returns on time
  • ensure that the business is paying the right amount of tax at the right time – too little (or too late) may give rise to penalties and interest – too much is just throwing money away
  • check the VAT treatment of ALL property transactions

More here

  1. Challenge any unhelpful rulings or assessments made by HMRC

HMRC is not always right.  There is usually more than one interpretation of a position and professional help more often than not can result in a ruling being changed, or the removal or mitigation of an assessment and/or penalty.

We can assist with any aspect of VAT. You don’t need to be a tax expert; you just need to know one… We look after your VAT so you can look after your business.

VAT: Brexit outcomes – retailers

By   19 January 2021
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I been asked many times about the VAT position of UK residents buying goods online (and also by more traditional methods) so I thought a brief overview would be helpful.

It has been reported in the media that some overseas retailers have stopped selling to UK customers. This is a commercial decision and is not necessarily solely due to Brexit (although, clearly that hasn’t helped).

What has changed?

Pre Brexit, under the Distance Selling rules, VAT at the rate applicable in the seller’s country would be chargeable by overseas suppliers to UK recipients. This was in the same way as a domestic sale. There were then thresholds which, when breached, resulted in the seller registering in the customer’s country, but these were rarely exceeded by small or SME businesses. The Distance Selling rules still apply to EU Member States, but not the UK.

As the UK is now a ”third country” sales to the UK from the EU which were previously intra-community sales are now imports. From 1 January 2021, sellers of goods B2C (to UK individuals) with a value below £135 – so called low value consignments are required to VAT register in the UK – more details here.  Clearly, many businesses are loath to do this hence their refusal to sell to UK customers. This change is not a result of Brexit but was a measure to level the playing field between EU and non-EU supplies (the latter often escaping the tax completely). From 1 July 2021 similar rules will apply to UK businesses selling to individuals in the EU, although there is likely to be a simplification measure; the so-called One Stop Shop (OSS).

Additionally, UK customers are usually responsible for the new post-Brexit import of goods, so there may be unexpected new VAT, duty and courier costs when buying certain goods from EU countries. This is similar to buying goods from any other country in the world.

It would appear that there will be a reduction in cross-border trade (in both directions) with the UK, and that is without factoring in shipping issues and delays at new borders.