Understanding VAT Registration: The New Threshold and Key Information

Do You Need to Register for VAT?

You are required to register for VAT if your taxable turnover exceeds the new threshold of £90,000 over a 12-month rolling period. HMRC requires businesses to register within 30 days of the end of the month in which the threshold is breached. Your effective date of registration will then be the 1st of the second month following the threshold breach.

Example:
If your business exceeded the threshold on January 24th, 2024, you must register by February 29th, 2024. Your effective date of registration will be March 1st, 2024.

Failing to register on time could result in:

• Paying VAT on sales made since the effective registration date.
• Penalties, depending on how late the registration is.

It is also essential to understand that businesses whose sales are entirely VAT-exempt cannot register for VAT. If you’re unsure whether your sales qualify as VAT-exempt, consult the official HMRC guidance here: When Not to Charge VAT.

Why Consider Voluntary VAT Registration?

Even if your taxable turnover is below the threshold, you might benefit from voluntarily registering for VAT. Here’s why:

1. Reclaiming VAT:
   • You can reclaim VAT on most goods or services purchased from other businesses, reducing your overall costs.
2. Enhanced Business Credibility:
   • Registering for VAT can make your business appear larger and more established, which may attract customers, lenders, investors, and suppliers. It can signal that your sales are above the VAT threshold, even if they are not.
3. Customer Benefits:
   • If your customers are VAT-registered businesses, they can reclaim the VAT you charge, keeping your prices competitive while allowing you to recover VAT on your expenses.

However, voluntary registration also comes with added responsibilities:

• Increased paperwork and administrative tasks, which can be time-consuming and costly, especially for smaller businesses.

What Happens After Registering for VAT?

Once registered, you’ll need to:

• Submit VAT Returns:
  • These are typically submitted every 3 months and must include details of the VAT you’ve charged customers and the VAT you’ve paid to suppliers.
• Make Payments or Claim Refunds:
  • After submitting your VAT return, you’ll either pay HMRC any VAT owed or receive a refund if the VAT you’ve paid exceeds what you’ve charged.

If you have questions or need guidance about VAT registration, feel free to contact us for expert assistance. For tailored support, reach out to Helpbox UK today.