Registering for VAT: What do I need to know?

When starting a business or scaling it, it can often feel like there is a million and one things to think about.

VAT is no exception and if you let this slide you could run into more headaches in the future and miss out on important reliefs.  

Registering for VAT is the first step to make sure you remain VAT compliant.

Who needs to register for VAT?

A business must register for VAT if its total VAT taxable turnover for the last 12 months was over £85,000, which is the VAT threshold.

You must also register if you expect your turnover to exceed £85,000 in the next 30 days.

You must register if by the end of any month, your total VAT taxable turnover for the last 12 months was over £85,000 and you must register within 30 days of the end of the month you went over the threshold.

The effective day of registration is the first day of the second month after you go over the threshold.

You must also register if you realise that your annual total VAT taxable turnover is going to exceed the threshold in the next 30 days.

Take note however, that the effective date of registration is the date you realised, not the date you exceeded the threshold.

Meanwhile, if you take over a VAT-registered business, you must register for VAT if the combined taxable turnover of the new business and your existing business is over the threshold.

Businesses, regardless of their VAT taxable turnover, must register if they are based outside the UK and supply any goods or services to the UK.

You can also choose to register for VAT if your turnover is less than £85,000, which is known as voluntary registration.

Be aware, that if you are registered for VAT you will need to report and record your VAT affairs quarterly online using compliant cloud accounting software, under the Government’s Making Tax Digital initiative.

What is my turnover?

Turnover is the value of everything you sell that is not exempt from VAT. It includes zero-rated goods, goods hired or loaned to customers, business goods used for personal purposes, goods you part-exchanged or gave as gifts and building work over £100,000 that your business did for itself.

What happens if I register late?

Depending on how much you owe and how late you registered, there may be a penalty you need to pay to HM Revenue & Customs.

Also, if you register late, you need to pay VAT on any sales you have made since the date registration was supposed to have taken place.

A new system of VAT penalties will be introduced from 1 January 2023, which will replace the current default surcharge with a new points based regime.

Do you need support with VAT registration or other related VAT issues? Contact our team today for advice.