VAT in the United Kingdom

In the United Kingdom, Value Added Tax (VAT) is levied by the HMRC on the goods or services provided by registered businesses. If your business has a turnover of more than £85,000 it is mandatory for you to register for VAT.

Note: This section is applicable only for the customers in the UK Edition of Zoho Billing.

VAT Settings

Configure VAT in Zoho Billing

If your business is registered for VAT, you will be able to enter all your details and set up VAT in Zoho Billing. You can find all your details in the VAT Registration Certificate you’ve received from HMRC.

To configure VAT in Zoho Billing:

Accrual Basis VAT is calculated based on the Date of the Invoice.
Cash Basis VAT is calculated based on the date your customers have made payments to you.

Set up Flat Rate Scheme

Some eligible businesses, whose VAT taxable turnover is £150,000 or less (excluding VAT) can choose to join the VAT Flat Rate Scheme. Business owners registered for the this scheme pay only a fixed rate of VAT.

If your business is registered under the VAT Flat Rate Scheme:

Here is an example of how VAT is calculated normally vs the flat rate scheme:

Let’s say there are three items sold at £100 each. All three items carry a 20% VAT on them. Which makes the total sale value including taxes to £360. So the VAT paid will be:

Scheme Calculation
Normal VAT 3 items of £100 each sold at 20% VAT

Total sale value inclusive of VAT: £360
VAT: 20 + 20 + 20 = £60
Flat Rate VAT 3 items of £100 each sold at 20% VAT

Total sale value inclusive of VAT: £360
Flat Rate = 14%
VAT = 14% of 360 = £50.40

Note: VAT cannot be reclaimed if you have enabled the flat rate scheme.

VAT Deregistration

Deregistration is the process of cancelling your VAT registration if your organisation’s turnover is below £83,000 or if the organisation is no longer eligible for VAT according to the criteria set by HMRC (Her Majesty’s Revenue and Customs).

The Cancellation process in the HMRC Portal might take up to 3 weeks to process. Once the cancellation is done in the HMRC portal, you can deregister VAT in Zoho Billing. Here’s how:

Your organisation will no longer be considered as a VAT-registered business after VAT has been deregistered.

Note: Once you create transactions after deregistering, you'll not be able to undo the deregistration. You will have to delete those transactions to undo deregistration.

To undo deregistration:

Now, your previous VAT registration will be reinstated in Zoho Billing.

VAT Rates

This section lets you view and manage all the VAT Rates you’ll be using in your organisation. Apart from the default rates, you will be able to add new rates, edit existing ones and delete them based on your requirements.

Add New VAT Rate

To create or add a new VAT rate:

Edit VAT Rate

To edit an existing VAT rate, follow the steps below:

Delete VAT Rate

To delete an existing VAT rate:

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