Driveway and patio businesses and VAT
You will have to register for VAT if your taxable sales are likely to be above the current VAT threshold. You will then have to charge VAT on your sales - this is known as 'output tax'. You will be able to reclaim any VAT you pay on purchases - this is known as 'input tax'.
Every quarter you will pay HM Revenue & Customs (HMRC) the difference between:
- the output tax you have charged
- the input tax you have paid on your purchases of materials and so on
Nearly all businesses have to pay their VAT bill electronically - for example by direct debit or online banking. HMRC allows you some time at the end of each quarter before you have to pay the VAT due. So, for example, the VAT due on sales made in months one, two and three would be paid at the end of month four. Your VAT return will show your payment deadline date.
Businesses that are having trouble making their VAT payments, or are worried that future payments will cause them problems, can ask for help from the HMRC Business Payment Support Service. If your business needs this financial assistance to tide it over, HMRC will look at your situation and discuss temporary options that could help out. These could include letting you make payments over a longer period and waiving late payment surcharges. To discuss payment problems with HMRC you can call the Business Payment Support Service Helpline on 0300 200 3835.
Standard rate or zero rate?
Standard rated goods and services have VAT of 20% added to the selling price while zero rated goods and services do not have to have any VAT (0%) added to the selling price. If you are registered for VAT you might undertake a mix of standard rate and zero rated work.
Standard rated services include:
- work on a new building project which does not fall into one of the categories qualifying for zero rating
- repair and maintenance work on existing exterior surfaces
- with some exceptions, work done to an existing building - like installing a patio at a house that has not just been built
Zero rated services can include installing paths, patios and driveways for newly built houses, for example.
Full details are available in Notice 708, Buildings and Construction, available to download along with many other VAT publications from the Gov.uk website. VAT can be a complex subject and it is recommended that you seek the advice of a suitably qualified professional adviser if necessary, particularly on issues such as zero rating.
Making Tax Digital (MTD) for VAT
Under HMRC's Making Tax Digital initiative, VAT-registered businesses with taxable turnover above the VAT threshold must keep records digitally and use special software to submit their VAT returns. You can find out more about MTD on the Gov.uk website.