UK Tax Questions? Ask a UK Tax Advisor for answers ASAP
I am planning to set up a stand in a local mill. Can you explain how VAT works? I will be selling toys that I have bought in.
If your turnovers (takings) are to be less than £77,000 in any 12 month rolling period, then you are below the VAT threshold so have no need to register - and therefore charge VAT on your sales. But this also means that you cannot reclaim back any VAT you have suffered.
But you do have the option to register voluntarily, as long as the goods you sell are a VATable item. Children's toys are a VATable item with a charge of standard rating (20%)
However if your turnover exceeds £77,000 then you are required to register for VAT and then charge VAT (further 20%) on your prices, and it’s this additional 20% that you pay over to HMRC VAT, through the completion of a quarterly return, on which you can reduce what you need to pay over to HMRC, by the amount of VAT you have suffered.