If your business does not have yearly sales that add up to the registration level shown on the tax sheet, you do not need to be registered for VAT. If you are already registered for VAT and you want to be demoted from the register, you will need to show that your turnover will be less than the de-registration level (shown on the tax sheet) over the next 12 months. You could use your budget sheet to show this.

You must pay VAT on all of your sales, unless the sales do not qualify for VAT (known as ‘zero rated’) or are exempt. The tax paid on goods and services you have bought (shown on the invoices) is your input tax and the tax on your sales is your output tax. If you have bought more than you have sold, or your sales are zero-rated, your input tax will be more than your output tax and you will get the difference paid back as a refund.

You have to send VAT returns every three months (every quarter).The date on invoices you send or receive is known as the ‘tax point’, and this usually helps you to decide which return you should include them in. However, you may apply to your local VAT office to account only for the tax you have  actually received. This is called ‘cash accounting’. You can also get back the tax you have paid on debts a person or company is failing to pay you, instead of waiting for the person or company to go bankrupt or go into liquidation (this is when a company stops trading and its assets are sold and split up equally between its creditors