The Financial Times Guide to Business Start Up 2016

CHAPTER 30

VAT

One subject that is guaranteed to raise ire among small businesses is VAT. Essentially, the VAT system is operated by businesses acting as tax collectors for the government. As far as you the business person is concerned, you pay tax when you buy goods from someone else and charge the tax when you sell them on. Broadly speaking, you hand over to HM Revenue & Customs (HMRC)* the difference between the amount of tax you charge your customers and the amount of tax you have paid your suppliers.

What is in this chapter?

• How the VAT system works (see below).
• Who has to register? (p. 442).
• What rate of tax? (p. 445).
• Voluntary registration (p. 446).
• How is the tax worked out? (p. 447).
• The records you need (p. 449).
• Accounting for VAT ...