This blog answers the question “Should council tax be on my VAT return?” It explains the purpose and states the contents of a VAT return. The method of calculating interest on VAT returns is mentioned and cases that can be exempt from VAT deductions are stated here.

Should Council Tax Be On My VAT Return?

No, Council Tax is not required to be mentioned on VAT returns as it is a charge levied by the government. Value Added Tax is defined as a consumption tax that is charged at each stage of the supply chain. It has no connection with the Council Tax charged on a property which has to be paid regardless of the level of consumption of that person.

VAT is essential to economists for calculating GDP or the value of all the goods and services produced in a country. Housing is also being consumed by residents and when a new property is purchased its monetary value will be recorded on VAT returns.

A similarity between the accounting of both of these is that Her Majesty’s Revenue and Customs department is responsible for collecting both VAT returns and Council Tax. But it must be understood that both taxes are collected and recorded separately on different evidential documentation.

What needs to be recorded on my VAT return?

The following items must be shown on your VAT return statement

  • Your total sales and purchases for the period (the full value of sales must be included)
  • The amount of VAT you owe (are indebted for)
  • The amount of VAT you can reclaim
  • The amount of VAT you’re owed from HMRC  (on the VAT return date)

VAT returns are basically taxes on business production within the territory of the UK

Businesses have to register for VAT returns if their revenue is more than £85000.

You must keep the following records for VAT return purposes:

  • Everything you buy and sell
  • Copies of all invoices you issue
  • All invoices you receive
  • Self-billing agreements
  • Any goods taken away for your private use
  • Debit or Credit notes

These records must be maintained for up to 6 years from when your business is set up.

What is Value Added Tax applicable to? 

VAT is collected by the professional who must pay it to the tax authorities. For taxable transactions, the tax is calculated on the price excluding tax according to different rates. The tax system (normal or simplified) depends on the amount of turnover achieved by the company and the amount of VAT payable annually.

Value added tax (VAT) is an indirect tax on consumption paid by the end consumer on certain products or services that he uses on British territory. The companies concerned (known as liable and liable) thus collect VAT and will have to HMRC, after deduction of the amounts of recoverable VAT on the expenditure concerned.

What declarations should I file?

The repayment of VAT is made using declarations, the form, and the frequency of filing which depend on your tax system.

How to pay your VAT returns?

Payment of your taxes must be made electronically from your tax account or Direct Debit

Please note that to be able to access the payment of your VAT, including the payment of your installments you must first validate the VAT declaration for the period concerned.

VAT exemption

Companies concerned by the VAT exemption must have a turnover of less than:

  • £85,000 on retail and accommodation activities to be exempt making from a VAT declaration
  • £83,000 to cancel their VAT registration altogether

This regime creates a VAT exemption, and its subscribers are not required to make a VAT declaration. In return, they cannot charge VAT to their customers.or use claim any VAT on their operating expenses

The Value Added Tax (VAT) weighs on the final beneficiary of a service. Its usual rate, known as the “normal” rate, is 20%.

The rules of territoriality make it possible to determine whether a service provided for the benefit of an individual is subject to this tax, the principle being that if the operation is carried out by a service provider established in Britain, it will be subject to VAT in Britain. 

The principle of VAT liability for services is that nearly all services are exempt from VAT

The specific list of the services not required to file a VAT return is given as follows:

What services are not subject to VAT?

These services are not subject to VAT:

  •  Banking, financial, and insurance or reinsurance transactions, with the exception of the

rental of sales

  • Fundraising events organized by charities or non profit organizations
  • Services performed in the education sector and for training workers
  •  The services of advisers, engineers, design offices, chartered accountants
  •  Services of membership or trade union organizations
  • Purchase and sale of children’s footwear and clothing
  • Services related to the sale, lease, or letting of land in possession of a property owner
  •  Information supplied through newspapers, and books
  • Motorcycle helmets

In order for these services not to be subject to VAT in Britain, the taxpayer must justify to the service provider that he does not usually reside in the UK. The service provider then draws up the invoice without British VAT, and in the event of an inspection, must prove to the tax authorities that the residence of the homeowner is not located in Britain

To benefit from a service not subject to British VAT, you must ensure that your usual – habitual – residence is located outside the UK. The concept of usual – habitual – residence is not legally defined. It is specific to VAT and depends on the person’s personal and professional ties at the time the services are provided.

Are the services of consultants, engineers, and accountants exempted from VAT?

The services of consultants, engineers, design offices, and accountants are exempt from VAT

The general tax code is very broad in the definition of the term “advisers, engineers, office

of study” and in particular the term “advisers”. HMRC specifies that this term includes

“in particular” auditors, lawyers, notaries, patent consultants, organizational consultancy, a market research consultancy, computer consultancy, consultancy in engineering

On the other hand, consulting services of any kind to change the statutory situation of a building in Britain will be subject to British VAT.

So for example, if you want to acquire a residence in Britain, you must make

use of the services of a notary. His bill is made up of a number of expenses, including

emoluments and fees which are subject to VAT..

If you consult your notary on rules of town planning, co-ownership, or any other question that does not modify the legal situation of a building, you do not have to pay VAT. There is also no Value Added Tax for all consultations relating to inheritance, matrimonial rules, etc.

Pay attention also to the services of experts and real estate agents who are considered as

services attached to a building and are therefore taxable in Britain when the building is

located in Britain

I carried out some of the construction work on my property myself and/or received help from my family. What about VAT?

When the work is carried out by professionals or independent contractors, you must pay the VAT mentioned on their invoices.

When you carry out part of the work yourself with members of your family and/or other persons, you do not have to pay VAT on this part of the work. In this case, you must prove that this work was actually carried out by you and/or with the free help of your family members and/or other persons.

In this case, you must be able to present proof of purchase such as receipts, invoices, etc. materials used. You should also be able to submit statements from family members and/or other people indicating that their assistance was given to you free of charge.

If you are subject to VAT and you carry out construction work yourself, specific rules apply.

When do I have to pay default interest (on VAT returns)?

If you pay after the due date, you will have to pay default interest on the amount due (calculated on the lower multiple of 10 pounds). You do not pay interest if it does not reach 5.00 pounds per month.

The yearly rate is currently set at 3.25%.

Interest is calculated per month from the 21st day of the month until the 20th day of the following month. Any fraction of a month is counted as a whole month.

Example: for the declaration of the first quarter of 2017, you must pay 1,569 pounds of VAT by January 31, 2017 at the latest. You only pay on September 15, 2017. You will therefore have to pay late payment interest from January 31st until September 20 (8 months).

The amount of interest is 1,560 pounds x 3.75/12%(487.5) x 8 months = 3900 pounds

Has the VAT rate changed after Brexit?

The VAT rate on tourist accommodation has been cut from 20% to 12.5% starting from 31st March 2022. For exporting goods to the EU, you can charge customers a 0% (zero rate) VAT following Brexit. Goods imported into the UK exceeding £135 in value will be charged VAT from 1st January 2021.

Conclusion

This blog post addressed the question “Should Council Tax Be Stated On My VAT Return?” There is clearly no mention of Council Tax in your VAT returns. Your council does not collect or know about the VAT returns you provide. The laws dealing with Council Tax defaulters and VAT absconders are completely different. 

Please feel free to comment on the content or ask any questions in the comments section below :

Frequently Asked Questions (FAQs) : Should Council Tax Be On My VAT Return?

What is a VAT return declaration?

A VAT return declaration is a form to tell Her Majesty’s Revenue and Customs (HMRC) how much VAT you have paid to other businesses and how much VAT you have charged from customers. 

A VAT return needs to be filed every 3 months, for that period, 

You can account for imports on your VAT return by using Postponed VAT accounting

I am building a house. What should I mention on the VAT about this?

In the majority of cases, you must complete a form (111/B57) to communicate additional information on the work carried out and the materials used.

Your municipality issues you an urban planning permit for the construction of your home and informs your tax department. Your taxation department will automatically send you the form when you have received your planning permit.

Based on your answers in the form, we determine whether we select your file for an additional check of the normal value of your home.

Can I correct my VAT return if I find an error?

Yes your VAT return can be corrected by:

  • Adding the net value to Box 1 for tax due to HMRC
  • Adding the net value to Box 4 for tax due to you

The accounting error to your VAT returns can only be corrected if it was made within the past 4 years. The reporting threshold for VAT return errors is £10000-£50000

Citations

Rates for charging VAT

VAT refunds

VAT Declaration Form

VAT Registration Threshold HMRC

Value Added Tax Act 1994

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