VAT registered: what it means and how to tell
A VAT registered business charges VAT and can claim it back. Learn the signs, check a supplier, and see what VAT really costs a buyer.
This path is practice in how the records and the sums work. It is not tax advice. Any rate or allowance in a question is an example for that question, so check GOV.UK for the current figures.
In this room: 3 tasks, 7 questions
- The signs of a registered business2 questions. You tick every answer that applies and pick the right answer.
- What VAT costs a buyer3 questions. You work out a figure and pick the right answer.
- Recording it2 questions. You write a journal entry and sort items into the right place.
A VAT registered business has a VAT registration number from HMRC. It adds VAT to its taxable sales, and it can claim back the VAT on its own purchases.
You cannot tell from a business's size or its name whether it is registered. Look at its invoices, then check the number.
- A VAT invoice shows the seller's VAT registration number
- A UK VAT number is usually nine digits, often written with GB in front
- HMRC's free online service on GOV.UK confirms whether a UK VAT number is valid and which business it belongs to
Jo Marlow of Marlow Knits has now registered for VAT. She is choosing a new wool supplier.
Answer the questions below
1 more question follows in this task.
A registered business claims back the VAT it pays. So what a purchase really costs it is the price before VAT.
A business that is not registered cannot claim VAT back. What it pays in total is its cost.
A supplier that is not registered must not charge VAT, so its price is the whole cost to any buyer.
| Supplier | VAT registered | Price before VAT | VAT | Total to pay |
|---|---|---|---|---|
| Fell Wool Co | Yes | 450.00 | 90.00 | 540.00 |
| Tarn Yarns | No | 500.00 | None | 500.00 |
Answer the questions below
2 more questions follow in this task.
A registered buyer splits each purchase: the price before VAT goes to the cost, and the VAT goes to the VAT account to be claimed back.
A buyer that is not registered records the whole amount paid as the cost.
Answer the questions below
1 more question follows in this task.