When to register your business for VAT

As a business owner, your goal is probably growth. But when you achieve that, your workload and responsibilities expand, and new opportunities arise.

Registering for VAT is one of those opportunities. However, given how complex the rules can be, it can be difficult to know if it's the best thing for your business.

If you're thinking about registering your business for VAT, here's everything you need to know before you get started.

What is VAT?

VAT stands for 'value-added tax' and is a tax businesses charge their customers on most goods and services sold in the UK.

They are then required to report and pay VAT to HMRC on a quarterly (or sometimes annual) basis. So, in other words, you can think of VAT as a tax businesses collect for the HMRC.

The main rate of VAT is 20%, although there is a range of goods and services for which VAT is charged at 5%, such as nicotine patches and mobility aids. Others have a 0% rate, including equipment for disabled people, while others, such as burial services, are exempt from VAT entirely.

To help with their VAT obligations, businesses can join a VAT scheme, which you should definitely consider if you're thinking about registering for VAT.

The main one is the flat rate scheme, which allows businesses to pay a fixed rate of VAT to HMRC and keep the difference between what they charge their customers and pay to HMRC.

There are others to consider, however, including the cash and annual accounting schemes, and VAT schemes for retail.

Why should I register for VAT?

Businesses that have a turnover of £85,000 or above must register for VAT. Yet, plenty of businesses below the threshold volunteer to charge and pay VAT.

Why? Surely it will only add more stress to your business accounting?

First, you can reclaim VAT on most of your business expenses, lowering their cost by up to 20% in some cases.

Although this does make your own invoices 20% more expensive, this won't matter if your customers are VAT-registered themselves; they can claim it back. Conversely, if they aren't, you do run the risk of becoming uncompetitive.

Registering for VAT also means that you will be ready for growth, as you won't have to be careful about going over the threshold when you aren't ready.

It also offers an added air of certainty and organisation to your business.

How to register for VAT

To register for VAT, you'll need to provide a fair amount of information to HMRC, including your National Insurance number or unique taxpayer reference, incorporation details and business bank account details. HMRC will not charge a fee to register.

It's easiest to register online, but you can send a postal registration in certain circumstances.

If your affairs are particularly complicated, you might benefit from getting some help with registering for VAT. As VAT experts, we're perfectly willing and able to do just that.

Talk to us about registering for VAT.

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