Businesses must register for VAT once their annual taxable turnover exceeds £85,000. So what do you need to know about signing up for VAT?

As VAT registration service accountants, we’re here to help you through the process. Whether you’re approaching the VAT turnover threshold or considering the benefits of voluntary registration, here’s what you need to know about signing up for VAT.

Understanding VAT

VAT-registered businesses must VAT on their sales (output tax) and can reclaim VAT they pay on business-related purchases (input tax).

The difference between these amounts is what your business owes to HMRC.

Mandatory VAT registration

As noted, the current threshold for mandatory VAT registration is set at an annual taxable turnover of £85,000, but this could change in the future.

This means that once your business’s taxable turnover exceeds this amount within any 12-month period, you’re legally required to register for VAT with HMRC.

Voluntary registration

Even if your turnover is below the threshold, you can choose to register for VAT. This may seem counter-intuitive, but there are several advantages:

  • Reclaim VAT: Once registered, you can start reclaiming VAT on your business expenses, which can be particularly beneficial if you have significant start-up costs.
  • Boost credibility: Being VAT-registered can enhance your business image, showing potential clients and suppliers that you’re a serious and established business.
  • Increased cashfow: Charging VAT on goods on services and managing your finances carefully can improve your cashflow.

The VAT registration process

The most common way to register for VAT is online through the HMRC website. This process involves creating a Government Gateway account if your business does not already have one.

The VAT registration process varies slightly depending on your business structure, but most businesses will need to provide:

  • their unique taxpayer reference
  • details of the business’s annual turnover
  • payroll information
  • the business’s bank details.

After VAT registration

Receiving a unique VAT number

Upon registering, businesses will receive a unique VAT number.

This legitimises the business as a VAT-registered entity, and becomes essential to invoicing.

Charging VAT on goods and services

With a VAT number in hand, the business is now legally obligated to add VAT to the sale price of VAT-rated goods and services it provides.

This is where learning about different VAT rates becomes crucial, as not all goods and services are taxed equally.

The standard VAT rate is 20%, the reduced rate is 5%, while some items are zero-rated or even exempt from VAT altogether. It’s your responsibility as the business owner to apply the correct rate.

Reporting and paying VAT to HMRC

The business must report the amount of VAT collected from customers to HMRC on a regular basis, usually quarterly. This is also the time when you can reclaim any VAT you’ve paid on purchases for use in your business.

Submitting VAT returns

Your VAT return is a summary of the VAT your business has charged and paid. The difference between these amounts is what the business will either owe to HMRC or be refunded.

This process is now streamlined through the Making Tax Digital (MTD) system, which requires businesses to use HMRC-approved software to keep records and submit VAT returns online.

Meticulous record-keeping

Keeping detailed records of all transactions is more than just good business practice: it’s a legal requirement. HMRC can request to inspect these records to ensure the correct VAT amount is charged and paid.

This includes invoices, receipts, and other documents detailing the VAT transactions.

Good record keeping makes it easier to prepare VAT returns and protects the business in the event of an audit or tax investigation.

Why access our VAT registration service?

The VAT system has its fair share of nuances and is complex for many business owners to manage without expert assistance.
Here’s how we can assist as VAT registration service accountants:

  • Assessment and advice: We can help assess whether you should register for VAT and advise on the timing and process.
  • Registration process: Your accountant can handle the VAT registration process for you, ensuring that all the paperwork is filed correctly and on time.
  • VAT accounting: Our tech-savvy experts can set you up with accounting software that streamlines the VAT process.
  • Ongoing support: Accountants can provide invaluable VAT support, helping you understand your VAT obligations and ensuring you stay compliant.

Final thoughts

VAT registration is an essential aspect of business tax compliance.

Understanding when to register, how to manage your VAT affairs, and the benefits of voluntary registration are essential for any growing business.

With the support of a knowledgeable accountant, you can confidently navigate the VAT registration process, ensuring that your business not only meets its legal obligations but also leverages VAT registration to its full advantage.

VAT doesn’t have to be complicated. With the right guidance, it can seamlessly integrate into your business practices, allowing you to focus on what you do best: running your business.

Read about our VAT registration service to find out more.