subject: Why Opt For Vat Outsourcing Services If You Are A Trader In Uk [print this page] Due to VAT legislations being so complicated in United Kingdom, business persons go for outsourcing the VAT function of the business. VAT stands for value added tax. The liability to VAT arises on the sale of products and services that are manufactured in UK and are taxable. This also includes certain exports to the other European Union countries as well as on import of products and services from outside the European Union region.
The major rates existing currently are zero and 20%, however, for some specific goods and services, the reduced rate of 5% is applicable.
The taxable supplies, as the name indicates, are those goods and services on which VAT is levied, irrespective of the rate whether the dealer of such suppliers is a VAT dealer or not. If in the previous financial year, your turnover of taxable supplies was in excess of 77,000 or in the current financial year it will exceed this amount within next 30 days, then you must file for VAT registration within the time period of 30 days. Default in the same may attracts penalties.
A VAT registered dealer must charge his or her customers the output VAT on the sale of taxable goods or services. The VAT credit for the input VAT can be set off against the output VAT and the resultant output VAT is payable to Customs and Excise. In case of the input VAT being more, the credit for the same can be carried forward in future or can be reclaimed other than certain exemptions.
There a number of accounting schemes for simplifying the VAT processing. These include Annual Accounting Scheme, in which the registered trader is to pay VAT due in three quarterly installments or nine monthly installments. These installments are determined on the basis of VAT payment made in the previous financial year. Another scheme is the Cash Accounting Scheme in which the VAT payment in made on the cash basis, that is when the customer pays you, then you pay the VAT on account. There is also a Flat Rate Scheme that is developed for helping the small business houses so that they do not have to spend their time in VAT accounting. The VAT liable is computed as a percentage of annual turnover at a flat rate. In addition, special scheme is introduced for the retailers including direct calculation schemes, apportionment schemes, the point of sale scheme, etc. For second hand products, antiques, etc., Margin schemes are useful. The most beneficial scheme for a particular trader can be very well decided by the VAT subcontracting firm.
By going through the above article, one can realize that the VAT tasks of the business are very complex and call for the help of VAT specialists that are assigned to you by the VAT outsourcing firms.
