Starting a new business can be an exciting and daunting experience. Entrepreneurs have to juggle multiple tasks, from securing funding to developing and marketing their products. However, one aspect that can often be overlooked is the importance of VAT. While most food products are zero-rated for VAT, there are exceptions that could lead to incorrect VAT liabilities. Therefore, it is crucial for businesses to have a clear understanding of VAT regulations.
One of the benefits of registering for VAT is the ability to reclaim VAT on setup costs and commercial energy consumption. However, businesses need to ensure that they are using Making Tax Digital (MTD) compliant accounting software to avoid any issues. MTD is an initiative by HM Revenue and Customs (HMRC) to digitize tax administration, and it requires businesses to keep digital records and submit VAT returns using software compatible with HMRC’s systems.
Another crucial consideration for businesses is VAT rules for e-commerce, exporting, and importing. When selling goods online, businesses need to be aware of the VAT rules for the countries they are selling to. For example, if a business is selling to customers in the EU, they need to register for VAT in each country where they exceed the distance selling threshold. Similarly, when importing goods from the EU, businesses need to ensure that they are paying the correct amount of VAT.
Furthermore, businesses need to be aware of the new border controls for high-risk food that are being introduced between 2023 and 2025. These controls will affect businesses that source goods or ingredients from the EU. Therefore, it is essential for businesses to plan ahead and ensure that they are compliant with the new regulations.
In conclusion, VAT is an important consideration for businesses, and it is crucial for entrepreneurs to have a clear understanding of the regulations. Registering for VAT can provide benefits, including the ability to reclaim VAT on setup costs and commercial energy consumption. However, businesses need to ensure that they are using MTD compliant accounting software and are aware of the VAT rules for e-commerce, exporting, and importing. Additionally, businesses need to plan ahead for the new border controls for high-risk food being introduced between 2023 and 2025. By doing so, businesses can avoid any issues and focus on growing their business.
