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VAT

A business is either registered for VAT or it’s not.

If it’s VAT registered then it needs to add VAT to its sales invoices (with one or two exceptions) but it can reclaim the cost of VAT it pays to its suppliers. This is done on a VAT return.

A useful summary of VAT is this – Tax Donut VAT overview.

Good bookkeeping is the key to keeping on top of VAT but also it’s a good idea to keep a separate bank account for tax savings so you know the money is in the bank to pay the VAT (and corporation tax) when the time comes.

Download our free Bookkeeping EBook here.

HMRC has several VAT schemes to help ease the burden of VAT on smaller businesses and both the Flat Rate scheme and cash accounting for VAT are worth looking in to.

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