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Should I register my business for VAT?

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A business must register for VAT when:

  1. Its taxable turnover for the previous 12 months to date exceeds the VAT registration threshold (£85,000 for 2017-18).
  2. Its taxable turnover for the next 30 days is expected to exceed the registration threshold.
  3. It buys goods to a value greater than the registration threshold from the EU even though its sales are VAT exempt or ‘out of scope’.

A business must register for VAT within 30 days of exceeding the registration threshold. This is a tight deadline and requires you to keep a close eye on your turnover if you are close to the threshold. There are financial penalties for late registration.

A business cannot charge VAT on its sales until it is VAT registered.

Can I register even if my turnover is below the registration threshold?

Yes. This is called voluntary registration, and there can sometimes be a financial benefit for doing so. As a rule of thumb, if the greater majority of your customers are VAT registered, you may benefit from voluntary VAT registration to enable the business to reclaim the VAT it incurs on its expenses.

When can I cancel my VAT registration?

A VAT registered business may de-register for VAT when its taxable turnover for the previous 12 months falls below the deregistration threshold (£83,000 for 2017-18), and it does not expect its turnover to exceed £85,000 in the following 12 months.

What else should I know?

Administering VAT can impose a substantial extra burden on the bookkeeping duties of a business so review your resources and ensure you have the resources in place to manage the extra workload.

VAT is charged at different rates depending on the product or service being sold. For 2017-18 the current VAT rates are 0%, 5%, and 20%. In addition some products like bank charges are exempt from VAT altogether. This is a complex area and professional advice can be essential in assisting a VAT registered business to charge and reclaim VAT at the correct rates.