Managing Value Added Tax (VAT) regulations can be complex and time-consuming, especially with constantly changing tax laws. ProboVAT by Prodat Group is a smart VAT compliance and automation solution that helps businesses streamline VAT calculations, ensure tax accuracy, and meet compliance requirements seamlessly.
DATA ANALYSiS
The AI-powered VAT reporting helped us identify discrepancies early, reducing penalties and improving financial transparency
Peter Johns The AI-powered VAT reporting helped us identify discrepancies early, reducing penalties and improving financial transparency
Peter Johns1. What is VAT?
Value Added Tax (VAT) is a consumption tax levied on goods and services in the UK at various rates, depending on the product or service type.
2. What are the current VAT rates in the UK?
Standard Rate (20%) – Most goods and services.
Reduced Rate (5%) – Some home energy, children’s car seats, etc.
Zero Rate (0%) – Most food, children’s clothing, books, etc.
Exempt & Outside Scope – Financial services, education, insurance, etc.
3. Who needs to register for VAT in the UK?
Businesses must register for VAT if their taxable turnover exceeds £90,000 (from 1 April 2024). Voluntary registration is also allowed for businesses below this threshold.
4. How do I register for VAT?
You can register online through the HMRC website or use an agent to complete the process. After registration, you’ll receive a VAT registration number and must start charging VAT.
5. What are VAT return deadlines?
VAT returns are usually filed quarterly (every 3 months) with deadlines set one month and seven days after the end of the period. Businesses on annual VAT accounting schemes file once a year.
6. How do I submit a VAT return?
You must file VAT returns through Making Tax Digital (MTD) for VAT, using compatible accounting software like QuickBooks, Xero, or ProboVAT.
7. What happens if I miss a VAT payment?
HMRC may impose penalties and interest for late VAT payments. The penalty system includes fines based on the amount owed and the delay period.
8. Can I reclaim VAT on business expenses?
Yes, if you are VAT-registered, you can reclaim VAT on eligible business expenses, provided you have valid VAT invoices.
9. What is the VAT Flat Rate Scheme?
The Flat Rate Scheme (FRS) allows small businesses to pay a fixed percentage of their turnover as VAT instead of tracking input VAT. It simplifies VAT reporting but may not always be cost-effective.
10. How do I correct VAT errors?
Minor errors (under £10,000) can be adjusted in the next VAT return. Larger errors should be reported to HMRC separately using form VAT652.
ProboVAT integrates with accounting software to automate VAT calculations, detect errors, and submit returns directly to HMRC. It also provides real-time variance reports and automated alerts to ensure compliance and accuracy.
11. Do I charge VAT on exports?
Exports to non-UK countries (outside UK & EU): 0% VAT (zero-rated) if evidence of export is kept.
Sales to EU businesses: VAT is not charged if the buyer provides a valid EU VAT number.
12. What is VAT MOSS?
VAT Mini One Stop Shop (MOSS) was a system for digital services in the EU, but after Brexit, UK businesses selling digital services to the EU must register for VAT in an EU member state.
13. What is the difference between exempt and zero-rated VAT?
Zero-rated items have VAT at 0%, but businesses can reclaim VAT on expenses.
Exempt items do not have VAT, but businesses cannot reclaim input VAT on related expenses.
14. What is Making Tax Digital (MTD) for VAT?
MTD is a requirement by HMRC for businesses to keep digital VAT records and submit VAT returns using compatible software.
15. How does VAT apply to online marketplaces and dropshipping?
Marketplaces like Amazon and eBay may collect VAT on behalf of sellers in certain situations. If dropshipping, VAT depends on where the goods are shipped from and the customer’s location.
16. Can I deregister for VAT?
Yes, if your VAT taxable turnover falls below £88,000 (from 1 April 2024) or you stop trading, you can voluntarily deregister through HMRC.
17. What happens if I stop trading but don’t deregister VAT?
You still need to file VAT returns and pay VAT due until deregistration is confirmed by HMRC.
18. Can I change my VAT accounting scheme?
Yes, businesses can switch between Standard VAT, Flat Rate Scheme, Cash Accounting, or Annual Accounting based on eligibility and turnover.
19. Do charities pay VAT?
Some charity activities qualify for VAT exemptions or zero-rating, but VAT rules vary depending on the type of goods or services provided.
20. How do I handle VAT for company cars and fuel?
VAT can be reclaimed on business-related fuel, but restrictions apply to personal use. A fuel scale charge may apply if a company car is used for both business and personal travel.
No, VAT registration must be done directly through HMRC’s official website. However, once registered, ProboVAT helps businesses automate VAT compliance, prepare VAT returns, and submit them seamlessly to HMRC.
ProboVAT saved us hours of manual tax calculations and ensured our VAT compliance across multiple countries.
Peter Johns Head of informatics at EBI