To learn more, take a look at our quick guide to VAT when you’re self-employed □Īlthough the standard VAT rate is 20%, the amount does sometimes vary depending on the types of goods and services your business sells. Top Tip: If you’re a self-employed business owner, knowing the ins and outs of VAT can bring financial benefits to your business that outweigh any added work. If the opposite is true, you’ll pay HMRC the difference. You can then reclaim this tax on your VAT return if the amount that you paid in input tax is more than the amount that you charged as output tax. The codes are usually composed of a percentage and one or two letters but may appear differently depending on whether it’s used on the sales form or purchase form.Īs a VAT registered small business, you’re expected to charge output tax on the taxable goods and services you sell, collect the tax from your customers and then pay it to the government at set intervals during the year depending on which VAT scheme you opt for.Īs a customer, you may also be charged input tax on taxable goods or services that you purchase for your business if your supplier is VAT registered. Simply put, VAT codes identify how much VAT should be paid on the purchases of services and goods from your business. #Reason limited registration code how to#Learn more about what VAT is, how much VAT is, how to charge VAT and alternative VAT schemes for small businesses by checking out our article on everything you need to know about VAT □ Top Tip: Before diving into the complexities of VAT codes, you need to have a solid understanding of how VAT works. #Reason limited registration code full#In this article, we’ll explain what VAT codes are, when exactly to use each code, and also provide a full list of commonly used VAT codes. Having a solid understanding of how VAT codes work (and how VAT works, in general) will help ensure smooth record-keeping and prevent any VAT related mistakes from being made. If you don’t have a clear idea of how VAT codes work, it could become more difficult to charge and pay the correct amount of VAT, which could leave your business liable to penalties and disrupt your cash flow.Īccording to a study done by Intuit QuickBooks, 19% of small business owners worry that they have missed something on their VAT return, while 18% are anxious that they have made a mistake on their return.Īlthough VAT related mistakes aren’t just limited to VAT tax codes, they are known to sometimes confuse business owners.
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