Vat Question.

[itsmefolks]

Can anyone help with a vat question?? I have a small business in retail. I am Vat registered but to be honest don’t understand how it works!! Turnover last year took the business into the VAT level and I understood it was simple according to my accountant! Anyway we bought goods inc vat, sold goods including vat and then got a vat bill from HMRC for vat!! I aint a clue folks!! I have asked the accountant and all I hear is gobbley gook!! Can anyone explain in plain English why we seem to be paying something that we were supposed to be able to “claim back”

Cheers in advance.

[WesterRoss]

In simple terms -
You buy goods for £100 + £20 vat.
You sell same goods for £150 + £30 vat.

You owe vatman £30 less £20 = £10.

Unless of course you sell at a loss!

[ummmm]

http://www.theanswerbank.co.uk/How-it-Works/Question1267381.html#answer-8263338

[sddsddean]

If your turn over is less than £150,000 per year, I recommend that like me, you sign up for the Flat Rate Scheme. It means that although you still have to keep your books, it takes about 2 minutes every 3 months to work out your VAT. You just add up the VAT inclusive value of the invoices you have issued and take a percentage (depending on what sector your business is in...mine is 10%) of that value and thats what you owe HMRC. So say you issued £12,000 of invoices in a quarter and your rate was 10%, you owe £1,200 for that quarter...its easy peesy! I worked out that using the scheme, I saved about £3,000 VAT per year. More details at http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm