24 May What are the benefits of voluntary VAT registration?
VAT registration becomes mandatory for your business if your annual turnover has been over £85,000 or is predicted to be so over the following 30 days. If your turnover is under that, VAT registration is not legally required. Many smaller businesses still choose to become VAT registered though. So what are the key benefits of voluntary VAT registration?
The voluntary VAT registration benefits
Voluntary VAT registration has several key benefits to consider:
- You can reclaim VAT on goods and services you’ve purchased from other VAT-registered businesses
- VAT-registered customers and clients can claim on your products and services, keeping your pricing competitive
- It lends an air of establishment to smaller businesses, which can make finding new customers and clients easier
- With sufficient evidence provided, voluntary VAT registration claims can be backdated by up to four years
- VAT registration necessitates accurate record keeping, which ultimately benefits your business going forward
These are just some of the many reasons smaller businesses choose voluntary VAT registration. It can help give your smaller business the image of a much larger and longer-established one, and many commercial clients simply won’t do business with non-VAT-registered businesses.
The disadvantages of voluntary VAT registration
Voluntary VAT registration does have some potential drawbacks to consider, though:
- Your goods and services may seem more expensive to customers who are not VAT-registered, which could limit sales appeal
- If you generate more from VAT paid on your goods and services than you pay on those you’ve purchased from others, it could lead to a large bill
- VAT registration necessitates more paperwork and more involved administration, which ultimately means your finances are more complicated
Is voluntary VAT registration right for you?
There’s no right or wrong answer. It depends entirely on your business, your services, and whether your sales are primarily business to business or business to customer. If your business is suitable, you could stand to enjoy many varied benefits from becoming VAT registered.
To learn more about voluntary VAT registration and if it could be right for your business, contact the friendly and professional accounting and payroll team at SQK Accountancy today.