One of the key decisions for business owners is whether to register for VAT (Value Added Tax).

The choice you make can have an impact on your finances, customers and operations so it deserves serious consideration.

Here are just a few of the elements you should consider and the potential impact on your business.

When do you HAVE TO register for VAT?

You must register for VAT if:

• Your taxable turnover exceeds £90,000 in any rolling 12-month period
• You expect your taxable turnover to exceed £90,000 in the next 30 days alone

This applies to all businesses based in the UK, regardless of their legal structure.

Additionally, if you and your business are based outside the UK but you supply goods or services to the UK (or intend to do so within the next 30 days), you must register for VAT immediately, even if your turnover is below the threshold.

If your taxable turnover exceeds £90,000 over the past 12 months, you must register for VAT within 30 days of the end of the month in which you crossed the threshold. Your VAT registration takes effect from the first day of the second month after you’ve registered.

If you miss the deadline for registering for VAT, you could face penalties and you will owe backdated VAT on all taxable sales made after the date you should have registered.

You may wish to consider the flat rate VAT scheme. If your taxable turnover is under £150,000, you can join the flat rate VAT scheme. This scheme lets you pay HMRC a fixed percentage of your business turnover which can be better for cash flow.

Why you might CHOOSE to become VAT registered

Even if your turnover is below £90,000, you can choose to register voluntarily. You may wish to register if you mainly sell to VAT-registered businesses, who can reclaim the VAT on your invoices, or you make zero-rated sales – so you charge VAT at 0% but this will allow you to reclaim VAT on any purchases.

Other benefits include:

1. Boosting the credibility of your business. Large or B2B clients may prefer to work with VAT-registered businesses.
2. Having the ability to reclaim VAT on business expenses – this could result in significant savings especially if you have a high level of purchases.

3. Avoiding penalties for late registration – if there’s a possibility that you may cross the £90,000 threshold and you don’t register for VAT, you could face penalties. By being proactive and registering in advance, you can avoid this.
4. Backdating VAT – Newly-registered businesses can backdate their registration by up to four years to reclaim VAT paid on business goods they are currently using. You’ll need to supply evidence but if you’ve made a large purchase, this may bring some extra income into the business. 

VAT registration – bear in mind

If you do choose to become VAT registered, please bear in mind that there are additional administrative tasks associated with this including regular reporting via Making Tax Digital (MTD). If many of your clients are not VAT registered, you may be increasing their costs if they now have to pay VAT on your invoices. You need to consider if this will lead to lost business.

To VAT register or not VAT register?

Whether you register for VAT depends on your business, your income and your customers. IF you’re unsure, we’re happy to tell you more about the admin associated with being VAT registered – we’re experts in this as we help many clients with their VAT returns.  For specific, bespoke information, please talk to your accountant.

As well as helping with VAT and MTD, we support our clients with a range of bookkeeping services including reconciliations and credit control, invoicing and payroll. In fact, we can handle most tasks that don’t require your personal time, giving you time to concentrate on something else that you are better skilled at doing or, to allow you time to enjoy doing something that fills you with happiness.

If you think that we can help – or if you’d like to talk about it and find out, do fill in the contact form or give us a call. We’re always on hand and happy to help!