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Do I need to register for VAT?

(Updated July 2016).

If your business turns over more than £83,000 (correct as of 1 April 2016) then it is compulsory that you register your business for VAT and this means you will need to charge VAT on your sales.

If you fully expect your turnover to rise above this limit before the end of the year, or it has already done so, then you should register for VAT anyway.

The VAT registration threshold changes annually so if you are not currently registered and you think you may achieve a turnover similar to the threshold it is worth ensuring that you know the limit for the current year.

Registration can depend on your past turnover and projected turnover. You will have to register if your turnover in the past 12 months has gone beyond the set threshold, you will also need to register for VAT if you expect your business to exceed the limit in the next 30 days. Some businesses can grow rapidly in a very short time, so it is important to keep an eye on your figures to make sure you are not in breach of tax laws. No one wants to be fined for falling foul of VAT laws!

You can find out more about registering for VAT by contacting us, we can help get your registration setup. The official page on the HMRC website can also help provide useful information on when you should register for VAT. If you want to find out how to register for VAT you can also visit the HMRC website or feel free to contact us. A lot of new business owners can become a little overwhelmed with the laws and regulations that surround VAT and how to register for it. We are here to help – feel free to contact us for some assistance and support.

If you run a business that turns over less than the VAT threshold you can choose whether to register for VAT or not. This is caller voluntary registration, where a business chooses to charge VAT on its products. This can be beneficial for companies purchasing stock and then claiming back Value Added Tax. You can also read more on voluntary registration on the HMRC website.

Should I Register For VAT?

This is a question that is asked a lot by small business owners when they see their turnover rise. Although your turnover may not be close to the VAT threshold, it may be of some benefit for you to take voluntary registration for your company. It is worth registering if it makes sense for your business and your plans for future growth.

If you are running a company that buys items from another VAT registered business, then they have to charge you VAT by law. However,  you can claim this back!

Here is a simple example of how this works and how you can be better off by being VAT registered:  Lets say that in a 3 month trading period you have collected £1,000 in VAT from your customers. You will then pay this £1,000 worth of collected VAT to HMRC. It is almost like you are acting as an unpaid tax collector!

However, during that same 3 month period you also purchased stock or services from a supplier and they charged you £200 + VAT (Total: £240). The amount you now have to pay to HMRC is the VAT you’ve collected from your customers (£1,000) minus the VAT you’ve paid out to your supplier (£40). So you will be handing over £960 in VAT charges to HMRC (£1,000 minus £40).

You don’t have to be good at maths to work out that you will be £40 better off at the end of this 3 month period than you would have been if you weren’t VAT registered.

Over the threshold but its a once off?

If your business has exceeded the VAT limit but this was due to a sales that was unexpected, a business can ask to be exempted from VAT registration. HMRC would require your business turnover to be under the de-registration threshold which is currently £81,000. (Correct as of 1st April 2016).

Why not speak to an accountant?
Tax can be a complete minefield for those who are unfamiliar with it, its one thing to run a business but to keep on top of a business and juggle the accounts is quite another. Some businesses are more time intensive than others, we always recommend having a chat with a qualified accountant. Why not give us a call? You can contact us here. We can talk through any questions you may have giving your peace of mind at the very least.