When it comes to running a business, understanding all the different taxation policies and regulations is probably the hardest part to deal with. There are a number of rules and exemptions you need to tackle to avoid making mistakes with your finances. Value Added Tax (VAT) is one of the key things business owners need to understand. To help you out, read our guide to VAT and discover whether resellers are required to pay it.
VAT is generally charged on most goods and services that are provided in the UK by VAT-registered businesses. It also refers to imported goods and services from the EU as well as from countries outside the EU.
In the UK, there are three rates of VAT. Selecting the right one depends on the types of goods or services your business provides. The rates are:
On top of this, there are some goods and services that are completely exempt from VAT and outside the UK VAT system. The goods and services that are exempt from VAT include:
It is still possible to register for VAT and to charge VAT from the above goods and services if you so wish to. This allows your business to reclaim any VAT paid themselves and therefore it is beneficial in some instances. This Simple Business article explains nicely the advantages and disadvantages of registering, so it might be worth reading.
Although it is possible to register for VAT even when you don’t have to, there are certain situations when it is necessary to register. In the UK, there are two main requirements for registering. These are:
Registering is a relatively simple process and you can do it through HMRC’s website.
Your business might also temporarily go over the threshold. This might be due to a large-scale one-off deal and it is possible to ask for an exception for registering, according to TaxAid.org.uk.
So if you are reselling goods as part of your business, the above information should help you understand when you need to register for VAT. In general, if you are doing it as a full-time business, you most likely fall under the scope of VAT. It is a good idea to discuss your particular situation with a professional accountant. As already mentioned above, you might not exceed the threshold, but reclaiming the VAT might still be more beneficial to your business. If you are unsure of your situation, you can contact us for more details.