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Should I Register for VAT? by Ian Marlow
You are obliged to register for Value Added Tax (VAT) when your turnover (that is all the income - not just the profit) from your business exceeds £70,000 in any twelve-month period. You can register voluntarily before your turnover reaches the threshold or even if it is never will. Some businesses do this just to look bigger than they are, or to reclaim VAT on a large initial equipment purchase. Also, if you do not have to charge VAT because what you produce is zero-rated, then you may want to register in order to reclaim the VAT on your purchases. You need to complete the form VAT 1 (plus VAT 2 for partnerships) which is available from HMRC. You can also now do this online or ask an accountant to help. The process tends to average a couple of weeks though HMRC do sometimes have problems with their computer systems and it therefore takes longer.
If you are taking on an existing business then you need to decide whether to take on their VAT registration number or register afresh. Only take on the current VAT number of the business as a going concern if you are sure that there are no problems waiting to be uncovered. By using a solicitor or accountant when purchasing the business you should ensure that you consider all the relevant issues.
How does VAT work? Basically, the VAT you pay on invoices for your purchases is deducted from the VAT you charge to customers and the difference paid to HM Revenue & Customs. This is usually done by completing a VAT return every quarter. Most small businesses are on the Cash Accounting Scheme which means you only pay VAT on bills that have been paid and receive credit for VAT on bills that you have paid. There is also an Annual Accounting Scheme which allows you to pay an agreed monthly fee against an estimated annual VAT liability, with an annual settlement. You should make sure you are as well informed as possible as VAT is a complex subject with special rules for many different types of businesses. There are, for example, schemes for second-hand clothes and one for tour operators, as well as others where specific rules apply. You would be unwise to attempt to do it all yourself without professional advice in setting up your accounting system and registering for VAT.
You should also be aware of the VAT Flat Rate Scheme (FRS) where you pay VAT to HMRC at a fixed percentage of turnover according to your business sector, but without deducting VAT on purchases and services This can be beneficial in some industries, and certainly simplifies the quarterly VAT returns, but again you need to be aware of the facts before you decide to adopt the FRS as there can be unexpected drawbacks. You also need to be aware that the VAT you pay at the fixed rate is a percentage of your turnover plus VAT at the standard rate. So, if your flat rate is 10%, the VAT to be paid on a turnover of £10,000 is not £11,000 but £12,929 (£11,750 x 10%).
Will you get a VAT Inspection? This will happen at some stage and does not necessarily mean that you have done anything wrong. You will need to ensure you have all your records available when you are inspected and be able to answer questions about specific entries. If you have an accountant who does your bookkeeping and completes your VAT returns, then you can elect to have your records inspected at their premises - often saving yourself from stress and worry. If the inspector comes to your premises, then be careful that they do not spend time quizzing your staff about the business. Be businesslike, efficient and co-operative but try to ensure they get all the information they need and can leave as soon as possible.
VAT can be a burden on some businesses as they grow, particularly those that cannot immediately pass on the additional 17.5% to customers because of local competition. Hairdressers commonly have a problem here and have to decide as they grow whether to increase their charges or absorb the VAT. In any case, there is an administrative burden which cannot be ignored. This cannot be avoided but you can have good or poor systems and get good or bad professional advice. Make sure you are well informed and deal with VAT efficiently from the start.
Ian Marlow runs HFM, a tax and accounting business based in London serving clients both resident in, and living outside, the UK. They regularly advise clients starting new businesses or advising existing businesses on incorporation. For more detailed tax information and access to their excellent free monthly tax newsletter, go to the HFM website => http://www.hfmtax.co.uk .
Article Source: http://www.earticlesonline.com/Article/Should-I-Register-for-VAT-/756246
How long does expedited flat rate shipping take?
I bought an item on ebay and the shipping it has is expedited flat rate shipping. It's coming from Honk Kong so how long would it take?
I have purchased several items from Hong Kong. The shipping is paid in the country of origin. It may be expedited in China, but it is handled like regular parcel post in the U.S. I usually get my packages in two weeks.
