How much do you know about VAT? If you don’t have a business, you probably know you pay it on certain things, but that’s about it. It is added to the prices you pay, so you don’t have to do anything other than buy whatever it is you need.
On the other hand, if you have your own business, you may know a lot about it and how it affects the way you do business. Many small businesses are well under the threshold at which they would have to register for VAT, and so they are not affected by it. However, if your business is likely to exceed the threshold in the UK (currently set at £81,000) then you do have to know about it. You have to register at the appropriate time, for starters, but even before that, it does pay to find out more about it.
VAT can be confusing to begin with, particularly if you have no prior experience of it. Most of us don’t really have to worry about it, unless a particular rate of VAT is increased and that has a knock-on effect on the price of certain goods we buy. However, if you’re in business and you have a significant turnover, you have to know more about VAT because it will directly affect you. This will happen in several ways. It will affect the prices you charge, the amount of VAT you collect and the amount you can claim back in VAT payments. All of this will influence the figures you enter on the VAT return you do every three months – even if it’s actually your accountant who does the return for you.
So you can see, it never hurts to find out more about VAT and to get to grips with it a lot earlier than you need to when you start your own business. To know more about it means you are educated and knowledgeable, and that knowledge will help you make the right decisions when it comes to dealing with any VAT topic in the future.
While you can employ someone else to take care of VAT payments and returns for you, you should still know a little about it. Many businesses delegate certain tasks to others in the business (or outside it) so the people in charge can get on with the day-to-day business tasks. If you have this option, that’s great. But it never hurts to learn more if you can. The more knowledge you have, the easier it will be to press ahead with your business and have a reasonable idea of what might lie ahead. And there is really no excuse for not finding out more about value-added tax and how it affects you and your customers.