VAT Basics - when to register
VAT vs Non VAT
Any business can register for VAT with the HMRC so long as they intend to make VAT supplies to consumers or b2b. However in some cases businesses are obligated to register for VAT see :
Recording VAT transactions
Recording VAT transactions
We are only explaining 23 categories of VAT (Out of Scope for VAT, VAT Exempt transactions and non-registered suppliers).
Out of Scope
These types of transactions are not included anywhere on the VAT return neither VAT 6 and 7.
e.g.MOT, wages, other taxes, place of supply of service is not in the UK, statutory fees, congestion charge,.
Services supplied abroad also fall under Out of Scope.
Exempt Supplies
These are included in box 6 and 7 but don't impact the VAT due. Examples of these transactions include:
e.g. Sporting and PE, education and training, some medecal treatments, financial services, insurances and investments.
Non registered VAT companies/traders
If you are VAT registered and purchase supplies from non registered VAT Companies or Traders you would treat these as exempt supplies - i.e. include them in Box 7 of the tax return but not in boxes 2-5.
We have not covered guidance here in respect of Zero rates, partially exempt or reverse charges. This will covered in our advanced section.
2023 - Introducing VAT Penalties
HMRC are introducing VAT penalties for late vat return submissions
Yes that's right - for VAT periods after 1st Jan 2023, if VAT submissions are late (i.e. 7th of the following month), then HMRC are implementing a way in which they will penalise businesses.
It isn't simply a "red card", but more like a "yellow card" approach. So if you are late, you accumulate cards, or in HMRC terms "points", and if these points breach a limit, businesses will get fined £200, and then £200 for each subsequent late submission.
You accumulate 1 point for each VAT return submission date missed. If you submit Monthly VAT returns HMRC is allowing 5 points to accumulate (5 missed deadlines) in any 1 year before they issue a fine of £200. For Quarterly VAT submissions, HMRC allows 4 points to accumulate before issuing a fine of £200. And for any annual VAT submissions, HMRC allows 2 points to accumulate before issuing a £200 fine.
Detailed guidance is available here:
https://www.gov.uk/guidance/penalty-points-and-penalties-if-you-submit-your-vat-return-late
