Why your small business should be voluntarily VAT registered

Why your small business should be voluntarily VAT registered

If you’re a new business that is under the VAT threshold, you may be thinking about whether you actually wish to be voluntarily VAT registered. It is a decision that a lot of small businesses face and the decision is, of course, yours. Some companies see being VAT registered as a complication, while others recognise how it can be rewarding.

What is the VAT threshold?

First off, let’s be clear on what the VAT threshold is and what it means for your business.

If your business has a taxable income of more than £83,000 in the 2016 – 2017 tax year, or has received goods worth more than this value, you must VAT register.

If you haven’t reached this threshold, you aren’t required to VAT register, but can do so voluntarily if you wish.

Why would I want to be voluntarily VAT registered?

VAT registration can have enormous benefits for growing businesses, so it is important to consider your options. The advantages of being voluntarily VAT registered include:

  • No risk of financial penalties if you fail to notice you’ve exceeded the threshold and haven’t VAT registered;
  • Many suppliers and companies won’t work with businesses that aren’t VAT registered, so it will open up business opportunities for you;
  • The ability to claim back VAT on any goods or services that you have purchased for your business, including any backdated goods/services in the past 4 years;
  • Your business will appear to be more successful than it actually is, giving your company profile a much-needed boost within your industry

Are there any disadvantages?

Like everything in life, there are always drawbacks. The obvious one is that it means more administrative work for your team. Also, you may have to pay any difference between the output and input tax to the HMRC. This means you can sometimes find yourself footing a massive tax bill you didn’t know about.

Can I VAT register my company?

You can voluntarily VAT register your company through the HMRC, but we always recommend using an accountancy firm instead. SQK Accountancy is here to provide you with VAT advice and VAT registration support for your business. Contact us today for more information.

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