The usual reason to register for VAT is when your VAT taxable turnover is more than £85,000 in any rolling 12-month period. Now, what does that mean, VAT tax will turnover? Well, it’s the sales of everything you sell that isn’t exempt from VAT.
Watch our video for more information on VAT.
What is exempt from VAT?
Well, the main examples are insurance, finance and credit, education training, fundraising events for charities, subscriptions to membership organisations, the selling, leasing and letting of commercial land and buildings.
Although do be careful on this because you can actually waive the exemption for that, and basically pretty much anything else you sell is not exempt from VAT, and therefore is included in your VAT taxable turnover.
Other reasons to register
Well, there were a couple of compulsory ones, one of which would be no matter what your turnover was in the last 12 months, if you expect it to be more than £85,000 for the next 30 days, you must register.
Similarly, if you by more than £85,000 worth of goods from EU VAT registered suppliers during year, but also there were voluntary reasons to register.
So, for example, so you can actually reclaim the VAT on your purchases and also credibility.
This isn’t necessarily factually correct, but a lot of people do think a VAT registered business looks better, particularly if you’re doing business with larger suppliers. It makes you look as if you’re a bigger business, therefore you feel better and more credible.
For a lot of my clients, I found the decision of whether to register for VAT comes down not to what they’re selling, but who they’re selling to, and that’s because it comes down to where their customers can reclaim the VAT on their sales.
If they’re below the VAT threshold and don’t have to register for VAT, if they’re selling direct to the public, it makes sense not to register.
If you’re, as an example, a hairdresser and you’re charging £10 for a haircut, it’d have to be a gents haircut like mine, if you register for VAT, you suddenly add on £2 to your price, it might stop people coming to you.
However, if you’re selling to a business that can reclaim the VAT, they don’t mind. The benefit you get from having registered these, you can reclaim all the VAT on your purchases.
How do I register?
Well, you do it online at HMRC’s website. There are a couple of exceptions to this where you do need a paper form.
The main one being, if you’re registering because of the level of EU purchases you have. But for most people, you do it online.
When you do it, you need a few details with you, you need to know what your turnover is, the business activity, and also your bank details so you can pay the VAT bill.
What happens next?
Well, once you’ve filled in that form, you’ll get your VAT certificate back within about 14 working days. Then after that, you aren’t going to have to file VAT returns. But that’s a whole separate video. If you would like any more information, please get in touch.