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# Vat Schemes and Vat Thresholds

Vat is a tax payable by any taxable person or business on sales income unless exempted or zero rated when the annual level of sales reaches the vat threshold limit, raised to ?$64,000 p.a. from 1st April 2007. Vat output tax is payable on total sales whether a business has registered for vat or not and it is therefore important to register for vat when the vat threshold is reached to enable full credit to be claimed by the vat input tax paid on purchases.
Minimise vat liability with vat scheme.
Vat Registration
Businesses become liable for vat when sales reach the vat threshold set on 1st April 2007 at ?$64,000 p.a. regardless of whether that business has registered for vat purposes.
Businesses whose customers are vat registered should consider opting for voluntary registration as sales would not be affected by registration and registering would permit that business to also reclaim vat inputs on purchases. Businesses with mainly non vat registered customers may wish to delay registration until the point is reached at which liability to vat becomes inevitable. Consideration should be given to maintaining sales below the vat threshold provided this does not result in a significant loss of profit. When the vat threshold of ?$64,000 p.a. is exceeded Customs & Excise should be advised. It may be possible to delay registration if sales breached the vat threshold due to an abnormal sales period that may not necessarily be repeated in the foreseeable future.
Having reached the point of vat registration consideration should be given to the various vat schemes which are available to either simplify the vat calculation or smooth the vat liability.
Choose the right vat scheme for your business
Unless a vat scheme is adopted then the standard inputs and outputs vat scheme would be applied. This involves charging all customers vat on sales known as output vat and paying this amount to the Vat office each quarter. Vat Registered businesses can also deduct from the vat liability the input vat on purchases that suppliers have charged the business. It is important to ensure all sales and purchase invoices are retained and an audit rail from the individual transactions to the vat liability is maintained as Customs & Excise do inspect vat records, the frequency of those visits, often once every three years can increase dramatically if the records are considered inadequate. Accounting Software can provide a solution to record keeping and DIY Accounting produce automated vat calculations from the basic data entry of sales and purchases on excel spreadsheets.
Vat Schemes
Vat Flat Rate Scheme
The vat flat rate scheme can be adopted by businesses that have an annual turnover excluding vat of under ?$150,000 p.a.

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