Help! Bloody vat confusion with hubby

[user1478639495]

Hey everyone anyone have any idea about VAT?!?!
Driving me and my hubby mad we're both on different pages here.

Think he's hit Vat now with his business so trying to work this out,
He thinks vat gets charged on everything so his expenses get put into his gross and gets taxed....not sure I'm explaining this I'll try put it bluntly.

Gross earnings, expenses, both added together and that figure goes forward to be taxed instead of gross income take off expenses then that net figure gets taxed....

As you can see I'm so confussed google is confusing me ever more we're both tired and biting at each other now 🤦🏻‍♀️ someone pls help me 😣

VAT payments are separate from income tax. You have to register for VAT and submit a quarterly return (at least we do, not sure if rules are different for different size businesses).

Does that help at all?

You don't pay VAT on goods you buy, but you charge it on what you sell. You owe the difference between the two.

Or get a refund I should add, if you spent more on VAT than you charged.

Yes as above it’s completely separate to income tax.

For VAT there’s two aspects - vat you charge on supplies (output vat), and vat you incur on purchases (input vat). The amount due to Hmrc is the difference between the two.

For example:

Your husbands makes supplies and charges the customer £100 plus £20 VAT. This is £20 of output vat (amount due to Hmrc).

In the same quarter, he buys supplies for £20 and incurs VAT of £4 (£24 in total) (£4 he can claim back from HMRC as input tax).

The amount due to HMRC is £16.

Note there’s lot of funny rules around things like mileage claims. There’s also something called the ‘flat rate scheme’ for small businesses that might be worth looking into, as it’s a bit simpler :)

www.gov.uk/vat-flat-rate-scheme

Is his turnover more than £85k in the past 12mth period, ie 1 August 2018 to 31st July 2019?

If yes, he probably needs to be VAT registered (there are a tiny handful of exceptions).

He will need to charge VAT at 20% on all his sales. This is known as output VAT.

He can then reclaim VAT on Vatabke purchases, input VAT.

He will have to pay over the difference between 2 (or reclaim if input>output.

BUT there are also various VAT schemes available which he may be eligible for and he will now need MTD compliant software so it might be a good idea to speak to his accountant or find one if he doesn’t have one already.