The basics of VAT registration

The basics of VAT registration

As your business grows, you must remember to register for VAT. Does your company need to do it, if so, when, and what else do you need to know about it? Here are the basics.

Does your company need to register for VAT?

Some companies have to register for VAT by law, while others opt to do it on a voluntary basis. You have to register for VAT with HMRC if the turnover of your taxable supplies is higher than the VAT threshold during any 12 month period.

Taxable supplies refer to any service or product that is subject to VAT, even at 0%, unless what you sell is exempt. The threshold currently stands at £83,000 for this tax year.

Should you consider voluntary VAT registration?

There are a few reasons why companies choose to volunteer for VAT registration before they have reached the threshold. One is that although they will need to charge VAT on their products and services after registration, which is classed as output tax, they could reclaim VAT that other businesses have charged, which is called input tax. A company is eligible to do this if their input tax is higher than their output tax in a given period.

Additionally, many companies opt for VAT registration in order to compete with larger businesses whose turnover exceeds the threshold. This is because if clients observe that a business hasn’t registered, they will know that their turnover is lower that other companies’.

Ongoing responsibilities

After the date of registration, you will have certain responsibilities to uphold. These include ensuring that the correct amount of VAT is charged, keeping up with payments due to HMRC, submitting VAT returns, plus keeping VAT records and a VAT account.

You need to remember that although you’re unable to charge VAT or display it on your invoices until you receive your VAT number (found on your VAT registration certificate), you still need to pay VAT to HMRC before then. To account for this, raise your prices and inform your customers why, then supply them with new invoices showing the VAT after you have received your number.

Do you need help registering for VAT? Call SQK Accountancy, and our financial experts will take care of the entire process for you.

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