When does my business need to become VAT registered?

You will be required to register for VAT if your taxable turnover breaches the threshold of £85,000 over a 12-month rolling period. HMRC advises that you must register within 30 days of the end of the month when your business went over the threshold – your effective date of registration will then be the 1^st of the second month after. For example:

If your business breached the threshold on January 24^th 2023, you will be required to register by 28^th February 2023 and your effective date of registration would be 1^st March.

Please be aware that if you register late, you will be expected to pay VAT on any sales made since the effective date you should have registered, and you might even be expected to pay a penalty depending on how late the registration is.

It is important to note that if all your sales are exempt from VAT you will not be able to register for VAT. If you’re unsure if what you sell is VAT exempt, please see the following link: https://www.gov.uk/charge-reclaim-record-vat/when-not-to-charge-vat

Why should I voluntarily register for VAT?

Alternatively, you can voluntarily register for VAT. Some benefits to this include:

• VAT can be reclaimed on most goods or services purchased from other businesses.
• Small businesses can make themselves seem larger and more established, which is attractive to customers, lenders, investors, and suppliers. They will assume that the company’s sales are higher than the limit for registering for VAT.
• If your customers are VAT registered businesses, they will be able to reclaim the VAT from HMRC. Your prices will still be competitive, and you can recover the VAT on your costs.

However, it will require extra paperwork and more administration which won’t be cost or time effective, especially for small businesses.

What do I do once I’ve registered for VAT?

Once you’ve registered for VAT, you’ll need to submit returns to HMRC which reports the amount of VAT you’ve charged your customers and the amount of VAT you’ve paid to other businesses – usually on a 3-month basis. Once you’ve submitted this, you’ll either be expected to pay HMRC any VAT you owe, or potentially be repaid by HMRC if you’ve paid more VAT than you’ve charged.