Q: Do I have to charge VAT as a sole trader?
Aug 08 2006
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Answered by: Clive Lewis Ask a question
Basically, if, at the end of any month, your annual turnover exceeds £61,000 in the previous 12 months or less you are required to register for VAT. You can voluntarily register for VAT if the turnover is less than the threshold. This means that once registered you will be given a unique VAT number relevant to only your business. You will be required to charge VAT usually at the standard rate of 17.5 per cent on your sales invoices, so that for example if your invoice value is £1,000 you will add £175 and the customer is required to pay you £1,175. Every quarter you will complete a VAT return showing how much you have collected in VAT (all the £175s in the above example, called Output Tax) and how much VAT you have paid to your suppliers (called Input Tax) and you will be required to pay over the difference, assuming that that the Output Tax exceeds the Input Tax. The question of being a sole trader or limited company is a matter of fact. If you trade as a sole trader (for example A. Smith or Arthur Smith) the VAT registration will be in that name. If you have formed a limited company (Arthur Smith Limited) the VAT registration will be in that name.
Two Public Notices which offer relevant advice are:
Notice 700 – VAT General Guide
Notice 700/1 - Should I be registered for VAT?
Notice 700/15 - The ins and outs of VAT
These can be located by clicking here.
The VAT advice line will help with queries on 0845 010 9000
The relevant form is an Application for Registration - VAT 1
You can download these from the internet here.
If you have any doubts you should talk to your accountant who will explain the requirements in greater detail and help with specific queries or even complete the VAT return on your behalf.
The ICAEW cannot accept any responsibility for the answers to the smallbusiness.co.uk website. By their nature the questions do not give sufficiently precise and full information to give a personal response. The response is general guidance including where the enquirer might find further and fuller information of relevance to the current enquiry.
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