All your frequently asked VAT questions, answered
Three letters. VAT. So, why are they so intimidating? If the matter of Tax wasn’t complicated enough, the idea of Value Added Tax (VAT) can be overwhelming. Here’s some of our most frequently asked questions and answers to help simplify a few aspects of VAT.
What is VAT?
VAT is a type of tax on consumption, and so is charged on items that people buy. It is collected by businesses and then forwarded on to the government, and applies to any taxable items based on their value. Both businesses and consumers are subjected to pay VAT, whether it be direct purchases or purchasing from manufacturers within the business supply chain.
What does VAT exempt mean?
Any product that should not be taxed is considered exempt from VAT. For example, essential goods or services are always VAT exempt, such as sporting activities,
education and training, and financial services.
The Isle of Man has a different Tax system to the UK, does this apply to VAT too?
The Island has uncommon rules when it comes to Tax and VAT. Everyone knows that the Isle of Man has low tax rates, as opposed to the UK. However, when it comes to VAT, although the Isle of Man is not part of the UK, it is treated as part of the UK for VAT purposes only. Therefore, VAT rules on Island generally mirror those in the UK.
Can I reclaim VAT on my business expenses?
In short, yes, you can reclaim VAT on business expenses. However, it is not possible to reclaim for certain types of business expense. For example, entertaining a client would not be something you are able to claim back. Food and accommodation however, would be allowable to claim VAT on. There is no minimum/ maximum amount of money you can claim back for.
When do I need to register for VAT?
- If the total value of your taxable supplies made in the last 12 months exceeds £85,000.
- Any time you expect that the value of your taxable supplies will exceed £85,000 in the next 30 days.
If you think we could be helping you, then connect with one of our team to find the best solution for your business mail@pinnacle.im or call the team on 627334
Andy McLarney
Andy is the Director at Pinnacle Bookkeeping Limited. For more bookkeeping and accounting advice please call us or complete our website contact form.
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