Should I register for VAT?
Should I register for VAT? Is one of many questions you ask yourself as a business owner! When running a business it can be easy to forget to keep track of your finances but one of the reasons it’s important to do so is that if your turnover exceeds the threshold of £85,000 you are required to register for VAT.
When to register
You must register for VAT as soon as you expect to hit the threshold. If you have already hit the threshold within the last 12 months or expect to do so within the next 30 days, then you must inform HMRC. Your VAT registration date will be the date you realise that you are no longer going to be exempt from VAT, not the date you reached the threshold.
Here’s an example;
On 1st July you realise that by the end of the month you’re going to hit the £85,000 threshold. Therefore you must register for VAT with HMRC by 30th July but your VAT registration date will be 1st July not 30th July or the date you hit the threshold.
If you unknowingly hit the threshold then you must let HMRC know within 30 days of the date you exceeded the Threshold. This is why it’s important to keep an eye on your finances because if this goes unnoticed for too long you will be subject to fines and penalty charges from HMRC and the amount you owe will be backdated.
If you don’t have time to do this, get in touch and we can be on the lookout for you!
In these circumstances your VAT registration date would be the first day of the month following the date you hit the threshold. For instance between 10th July 2021 and 9th July 2022 your taxable turnover was £86,000 you must register by 30th August 2022 and your registration date would be 1st September 2022.
Voluntary Registration
You may wonder why you would choose to be VAT registered but this can work in your favour in certain circumstances.
If you have lots of suppliers who are VAT registered and you’re paying VAT on goods and services regularly it may be more beneficial for you to register for VAT. This would then mean that you could reclaim the VAT you pay. You would also need to charge your clients VAT on all future invoices or transactions.
If you are nearing the threshold then it might be an idea to register as soon as possible so that you don’t get charged any penalties for exceeding the threshold unknowingly.
Another advantage of voluntarily registering for VAT is that it makes you more credible to other businesses. They see that you are VAT registered which screams success and shows that you are a legitimate, reputable company.
Once you register for VAT you can claim for the VAT you have paid on previous goods you purchased backdating 4 years providing that they are still in use within your business and that you have proof of purchase. You can also go back 6 months prior to registration for any services which you paid VAT on.
If you voluntarily register for VAT it’s important to know that you still have to comply with the same rules as you would if you had reached the threshold.
Making Tax Digital
Once you register for VAT it’s vital that you comply with the rules of Making Tax Digital. Follow this link to find out more:
If you need any advice about registering for VAT then please reach out to us. We would be more than happy to help!
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