Ordinary business costs
VAT on costs used for taxable business activities is often recoverable where the business holds the necessary VAT evidence and no restriction applies.
VAT accountant in West London
Get the VAT treatment right before the return is due.
SV&Co supports VAT-registered and growing businesses across Southall, Ealing, Hayes, Wembley and wider West London with VAT registration, bookkeeping, returns, MTD, VAT schemes and practical advice on transactions.
VAT is not simply “20% on everything”.
The right answer depends on what you sell, where you sell it, who buys it, what VAT you can recover and whether a special scheme or exemption applies.
VAT registration
VAT uses taxable turnover, not profit.
The current compulsory registration threshold is £90,000. The normal test looks at taxable turnover over a rolling 12-month period, and there is a separate test where you expect taxable turnover to exceed the threshold in the next 30 days alone.
Rolling 12-month test
If total VAT-taxable turnover for the previous 12 months goes over the registration threshold, registration is normally required. This is a rolling test, not simply the accounting year or tax year.
HMRC’s effective-date rules depend on when the threshold was exceeded, so this should be checked as soon as turnover approaches the limit.
Next 30 days test
If you expect taxable turnover to exceed the threshold in the next 30 days alone, a different immediate registration rule can apply.
This can matter where a business wins a large contract or experiences a sudden jump in sales.
Voluntary registration
A business below the compulsory threshold can register voluntarily. It can be attractive where customers are VAT registered and the business incurs recoverable input VAT, but less attractive where customers are price-sensitive consumers who cannot recover VAT.
Deregistration
The current optional deregistration threshold is £88,000, subject to the detailed rules and the expected future level of taxable supplies.
Taxable turnover is not the same as all sales.
Exempt supplies are generally excluded from the normal taxable-turnover threshold. Zero-rated supplies are taxable supplies and normally count.
Input VAT
Paying VAT on an expense does not automatically mean you can reclaim it.
Normally, recoverable input VAT must relate to the VAT-registered business and be supported by the required evidence. Several categories have special restrictions.
Business entertainment
VAT on free business entertainment for UK business contacts is generally blocked. Employee entertainment can follow different rules.
Cars and motoring
VAT recovery on cars is heavily restricted. Repairs, leasing and fuel each have their own rules and adjustments.
Mixed private/business use
Only the business element may be recoverable where a cost has both business and non-business use, subject to the detailed VAT rules.
Partial exemption
If a business makes both taxable and exempt supplies, it may need a partial-exemption calculation to determine how much residual input VAT can be recovered.
Pre-registration VAT
Some VAT incurred before registration can be reclaimed subject to time limits, ownership, use and evidence conditions. The detailed facts should be checked before claiming.
VAT accounting schemes
The simplest scheme is not always the cheapest scheme.
We review the commercial effect before moving a client onto or off a VAT scheme.
Flat Rate Scheme
Join: £150,000 or less taxable turnover
You pay HMRC a flat-rate percentage based on the business type rather than normally reclaiming individual purchase VAT. Limited-cost businesses can be subject to a 16.5% flat rate.
It should be compared with normal VAT accounting rather than assumed to save tax.
Cash Accounting Scheme
Join: £1,350,000 or less
VAT is generally accounted for when customers pay and input VAT is reclaimed when suppliers are paid. This can help cash flow where customers take time to pay.
The current general exit threshold is more than £1,600,000.
Annual Accounting Scheme
Join: £1,350,000 or less
The business normally submits one VAT return a year and makes advance payments during the year. It can reduce return frequency but is not ideal for every cash-flow pattern.
The current general exit threshold is more than £1,600,000.
Making Tax Digital for VAT
VAT bookkeeping and software need to work as one process.
All VAT-registered businesses should now be within MTD for VAT unless exempt. New VAT registrations are normally brought into MTD automatically. Businesses must keep the required digital records and submit VAT Returns using compatible software.
Capture correctly
Sales invoices, purchase invoices, receipts and import information.
Code VAT correctly
20%, 5%, 0%, exempt, outside scope, reverse charge and other treatments as appropriate.
Reconcile
Bank, VAT control, sales, purchases and unusual balances.
Submit through software
Use MTD-compatible software and retain the digital VAT records.
Software does not fix a wrong VAT treatment.
The system can automate calculations, but somebody still needs to decide whether a transaction is standard-rated, zero-rated, exempt, reverse charge, recoverable or restricted.
Interactive VAT tools
Check the registration position and understand a simple VAT return.
Official source: GOV.UK / HMRC
Last checked: 16 August 2026
Live WordPress version uses SV&Co Official Data Hub
VAT Registration Checker
Use taxable turnover, not accounting profit.
Simple VAT Return Illustration
Educational only. It assumes entered purchase VAT is fully recoverable.
VAT FAQs
Questions business owners regularly ask.
When do I have to register for VAT?
You normally need to register when VAT-taxable turnover exceeds the current registration threshold on the rolling 12-month test, or when you expect taxable turnover to exceed it in the next 30 days alone. Special rules apply in some circumstances.
Should I voluntarily register before I reach the threshold?
Sometimes. It can help where customers can recover VAT and the business incurs significant recoverable VAT. It can hurt pricing where customers are consumers who cannot recover VAT. The commercial effect should be modelled first.
What is the difference between zero-rated and exempt?
Zero-rated supplies are taxable at 0% and generally preserve input VAT recovery rights. Exempt supplies are not taxable supplies and can restrict input VAT recovery.
Can I reclaim VAT on all business expenses?
No. Business entertainment, many cars, private-use elements and costs relating to exempt activities can be blocked or restricted.
Is the Flat Rate Scheme always cheaper?
No. It is primarily a simplification scheme and the result depends on the business category, level of input VAT and whether the limited-cost rules apply.
Does MTD software mean my VAT return is correct?
No. Software can maintain records and submit the return, but the VAT treatment still needs to be correct.
Reviewed by
Sandip Vadher, PhD FCCA
Founder of SV&Co Accountancy. Fellow Chartered Certified Accountant with more than 20 years of finance and accountancy experience.
Need help with VAT?
Tell us what the business sells and where the problem is.
Registration, a quarterly return, software, an unusual transaction, VAT errors or a scheme review.
Useful starting information
Tell us your business activity, approximate annual turnover, whether you are already VAT registered, accounting software used and the VAT issue you want reviewed.