VAT Refunds - The Rules
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Who should be registered for VAT?
If you own a business that is over the threshold (2010: £70,000) for turnover in the past twelve months, or if you believe turnover for the next 30 days will be more than £70,000 then you must register for VAT. A taxable person can be an individual, a partnership, a trust or charity, a limited company or a limited liability partnership - if you don't monitor your turnover you could come into problems as there is a penalty for not registering on time.
VAT Refunds
Any input tax you pay on things the business has purchased can be refunded if you are registered for VAT. The credit is redeemable for all of the VAT paid on inputs where you have been issued with a VAT invoice - however, it does not count for things like private purchases, entertainment, cars and second-hand goods.
VAT Return
A VAT return is required every quarter, and must be submitted with payment to HM Revenue & Customs within 30 days after the end of the quarter - again, penalties will be issued if you are late with this. If you are a large company with regular repayments then you can make monthly returns. The easiest way to file your VAT return in the 21st Century is by using the Internet - this will save you plenty of time.
All tax invoices issued and received must be kept for a minimum of 6 years.
Registering for VAT and claiming back money on certain goods is a great way to save money, and is highly recommended if you want your company to appear bigger than it actually is. Why? Being registered for VAT suggests that your company is over the threshold and can lift the reputation of your company when dealing with potential clients that are also VAT registered.
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