VAT applies to many business supplies, but not every receipt or purchase has the same treatment. Establish the nature of what you sell before deciding which rules apply.
Check registration
Taxable turnover can trigger compulsory registration. Both turnover already achieved and expected activity may matter, and special rules apply in situations such as taking over a business or operating from overseas.
Voluntary registration can sometimes be appropriate below the compulsory threshold. Consider the effect on customers, pricing and recoverable costs.
See our VAT reference and the official registration guide for current thresholds and conditions.
Distinguish the supplies
Standard-rated, reduced-rated and zero-rated supplies are taxable supplies. Exemption is different from zero rating and can affect the ability to recover VAT on costs.
Check the actual supply rather than relying only on the industry in which you operate.
Keep records and calculate the return
Under ordinary accounting, VAT charged on sales is compared with recoverable VAT on purchases. The result may be a payment or repayment.
Valid records and evidence support the calculation. Registered businesses also need to consider the relevant digital record and filing requirements.
Choose a suitable scheme
Cash Accounting, Annual Accounting and the Flat Rate Scheme each change particular aspects of VAT administration. They have separate eligibility conditions and can affect cash flow or the amount payable.
Browse the other VAT helpsheets before deciding, and compare the figures for your business rather than assuming a simplified scheme always saves money.