Value-added tax (VAT)
If you are supplying goods or services in return for payment and your annual earned income is likely to be over the VAT threshold (£85,000 at April 2020), you must register for VAT and charge VAT on goods and services unless they are exempt or zero-rated.
VAT at the standard rate applies to sales of food and drink to be consumed on the premises (e.g. in a café). Food and drink which isn’t consumed on the premises is mostly zero-rated but many are not (e.g. savoury snacks, hot takeaway food) so it’s important to take advice and be sure.
Charities are also exempt from paying tax on certain goods and services including building hire and some types of membership fees.
The rules are quite complex and the cost of getting it wrong can be steep. So, get to know the rules that are relevant to your activities and, if you are in any way unsure, take advice and/or get a ruling in writing from HM Revenue and Customs (HMRC).
Employee tax and national insurance
If your project has an employee, employer’s national insurance contributions (NICs) must be paid for them at the same time as you deduct income tax and their own NICs using the PAYE (Pay As You Earn) system.
Making Tax Digital
Both VAT and income tax must be paid using the Government’s Making Tax Digital (MTD) online system. If your accounting software isn’t compatible with MTD, you can use free Basic PAYE Tools (see below).
If you are a limited company you must pay tax on your profits, however charities are exempt in many circumstances, e.g. so long as the profits are used for charitable purposes. Again take advice.
Non-domestic rates (business rates)
If you have premises you may be liable for non-domestic rates, although you may be able to get relief through the Small Business Bonus Scheme.
Where to go for information
- Tax & VAT (SCVO)
- VAT (gov.uk)
- PAYE and payroll for employers (gov.uk)
- Help and support for Making Tax Digital (gov.uk)
- Corporation tax (gov.uk)
- Non-domestic rates (gov.scot)
- Small Business Bonus Scheme (mygov.scot)