VAT – The Facts

VAT – The Facts

For many small businesses, the challenge of running and profiting from an enterprise is a difficult one, and many struggle with this already imposing task without the introduction of complications such as VAT. But for those who are interested, there are a few questions. What is VAT, and do I, as a businessperson, apply for it?

What precisely is VAT?

‘VAT’ is an acronym for Value Added Tax, which is a consumption tax that was created in the UK in the year of 1973, and exists as a government revenue, and provides the third largest source of income in the country. Since 2011, the standard rate for VAT has been 20% of the price of the goods or service bought. It has been called an ‘indirect tax’, because the amount of money charged that is actual VAT is paid to the government by the vendor of the goods and services, as opposed to the customer purchasing the commodity.

So do I need to apply for VAT?

For you to reach a point where you’ll need to apply for VAT, there are certain criteria that must first be met. Firstly, it’s important to consider that if the annual earnings of your business are more than £85,000, then you are legally required to charge VAT and must apply for it. You are allowed to register for VAT at any stage in time, but it’s worth considering that a sudden increase in prices may well upset and dissuade customers, who may feel inclined to seek out other vendors.

How do I register?

Registering for VAT is a process that, like many other legal requirements, involves filling out paperwork. The form required to apply for VAT can be found directly on the government website and requires basic information such as the name of the business applying, contact information, and other various details about the business itself. Once the application has been processed and approve, you’ll be sent a pack which contains a certificate confirming you have applied for VAT, as well as the unique number which is used with all processes pertaining to your VAT from that point on. Before you sign up for VAT, see the advantages and disadvantages of registration.

How does VAT affect my business?

Once you’ve been approved for VAT and have the certificate to prove it, you’ll then have to, by law, charge your customers new rates which incorporate the VAT. You can claim back certain parts of the VAT as part of your expenses, but it’s dependant on circumstances and other factors.

Overall, VAT may seem complicated, but it can be easy to understand and a valuable addition to any business. Being able to reclaim certain amounts of money as part of VAT will be welcome to many organisations. Application for VAT isn’t difficult, the forms are easily available and not crammed full of legal jargon. If you’re a growing business with a stable customer base, and you’re looking to expand past the £85,000 mark and become a big player in your industry, it’s worth knowing the facts.

EORI – How To Get It For A VAT Registered Company

 

The Economic Operator Registration and Identification is a system that was introduced in 2009 and is now fairly important for the tracking and monitoring of shipments of freight moving across the entirety of the EU. However, what does it do, and how do you get one if you’re a VAT registered company?

So what is the Economic Operator Registration and Identification system?

To begin with, it’s important to know precisely what The Economic Operator Registration and Identification system are. The entire process is vital for the tracking of freight as it moves around the EU, and each number is unique. Is it assigned to an individual legal identity, which can be a sole trader or a company, or even just an individual? It is allocated to you by the member state you’ve originated from, so in the case of the UK, the number is issued by the HMRC. This number is crucial if you wish to trade goods with any organisation that is based outside of the EU, as the freight will be unable to leave without it.

How does a company get an EORI number?

As is the case with many different types of processes and legal requirements, the central government website has the form that businesses or anyone looking to get an EORI number will need to fill out, available to be applied online for convenience. There are many different details which will need to be put onto the form for it to be sent off. While these will include basic information such as the name of the applicant, their position within the organisation and contact details, there is other information that will be needed. For the application to be successful if you are a VAT registered company, you’ll need to provide details which include the VAT registration number, the name of the company that the VAT has been registered to, and other similar details. It’s worth noting that the information provided must be correct and match up with the information currently held by the HMRC. Otherwise the application can be delayed and in some cases rejected. Once you’ve uploaded this form with all the details, you will then need to wait three days at least before the application is processed. In most cases, you will receive confirmation, along with your EORI number, in an email.

Overall, the process that is required for an EORI number to be awarded to a VAT registered company is not necessarily complicated but does require fully accurate details and exceptional care to be taken when it comes to filling out the correct paperwork. For many companies, trading on an international level will significantly broaden the number of customers and clients they can receive, and being able to operate outside the EU will broaden this number further, so it is absolutely vital that an EORI number is obtained with as little hassle as possible, to ensure a swift transition to global trading.