Do I have to register for VAT?
If your turnover exceeds £85,000, or you expect it to exceed £85,000 in the next 30 days, you must register for VAT. Once registered for VAT, you need to begin charging VAT on all goods and services you sell. This applies as soon as you register – you don’t wait until you receive your certificate.
My turnover won’t exceed £85,000 – do I still need to register?
You don’t need to register for VAT if you don’t hit the registration threshold. However, there are still reasons you may wish to register, as it can provide a benefit to your business.
Benefits of VAT registration
Even if you’re below the threshold, you may wish to consider VAT registration for the following reasons:
- You can reclaim VAT on goods and services purchased by your company, where you have been charged VAT.
- Many clients and suppliers, especially larger ones, will only deal with VAT-registered companies. This gives you access to a wider range of suppliers and clients.
- Being VAT registered lends credibility to your business. Your clients and customers can potentially reclaim the VAT you’ve charged them on invoices.
Downsides of VAT registration
Registering for VAT means that you have to charge VAT on top of your invoices. This means that, if you previously sold a service for £500, you’d need to invoice £600 once registered – £500, plus 20% VAT. If your customers aren’t VAT registered, either they’ll need to swallow the increase or you’ll need to take a hit to your bottom line.
What do I need to do when I’m VAT registered?
Each quarter, you’ll need to submit a VAT return to HMRC – this can only be done online. This will show the total VAT you’ve charged to your customers on goods and services. If registered with a contractor accountant, they’ll take care of your VAT returns for you.
You’ll also need to include the VAT you’ve paid when purchasing goods and services. When VAT registered, it’s possible you’ll be able to reclaim some of the VAT paid. Have a look at our Flat Rate VAT guide for more details.
Once submitted, you’ll need to pay the difference to HMRC if your VAT output exceeds your VAT input. If the reverse is true, your company is entitled to a refund.
We hope you found this guide useful. If you still have questions about VAT or would like to know if it’s beneficial to register for VAT, please call us on 01442 795 100 or drop us a line at firstname.lastname@example.org.