Aerial installers and VAT
You'll have to register for VAT if your taxable sales are likely to be above the current VAT threshold. You'll 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'll pay HM Revenue & Customs (HMRC) the difference between:
- the output tax you've charged
- the input tax you've paid on your purchases of goods, materials, equipment 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 don't have to have any VAT (0%) added to the selling price.
Although most of the aerial installation work you do will probably be standard rated if you're registered for VAT, you might do some work that's zero rated too. This could include, for example, installing television aerials and satellite dishes - including fixed cabling but excluding non-fixed items like digiboxes - on newly built houses for a property developer.
Full details of work that can be zero rated are available in VAT Notice 708 Buildings and Construction which you can download from the Gov.uk website.
VAT can be a complex subject, particularly when it comes to deciding if something can be zero rated. So it's recommended that you seek advice from HMRC or a suitably qualified professional adviser if you're at all unsure about something.
Working out the VAT
Your market research will have helped you to estimate your sales income every month. Now work out if you'll need to register for VAT. If so - and assuming that most or all of your sales will be standard rated - estimate approximately how much VAT you'll pay to HMRC every quarter. Use the VAT fraction, which is currently 1/6, along with your estimate of sales to work this out.
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.
Alternative flat rate scheme
You might be interested in an optional flat rate scheme (FRS) for eligible small businesses. Under this scheme you continue to issue tax invoices to VAT registered customers, but the VAT payable every quarter is calculated as a percentage of your VAT-inclusive turnover. You apply the appropriate flat rate percentage for your type of business. However, this scheme cannot be used with the retail schemes, the margin scheme for secondhand goods or the cash accounting scheme. You can find full details of the FRS, who can use it, and the flat rate percentages in VAT Notice 733 Flat rate scheme for small businesses. It will help you to decide whether or not the scheme is suitable for you.