Contact Us

Registering for VAT – What You Need To Know

When should your business register for VAT?  For anyone running a small business it can be a challenging process following the HMRC rules, particularly if the business owner is being pulled in different directions.

This article answers when you need to register your business for VAT, and the registration process to be followed.

VAT Overview

Value Added Tax (VAT) is a tax charged by VAT-registered businesses on most goods and services in the UK. It is also charged on some goods and services that are imported from outside the UK.

If a VAT-registered business is charged VAT when it buys goods or services, it can normally reclaim the VAT it has incurred. If the entity is not VAT-registered, then it cannot recover the VAT that is charged.

VAT-registered businesses charge customers VAT on top of the sales price, collect the cash, and then pay it over to HM Revenue & Customs (HMRC) – less any VAT they have incurred on their purchases.

When Do I Need To Register For VAT?

You need to register your business with HM Revenue and Customs (HMRC) when your VAT taxable turnover:

  • exceeds £85,000 in the last 12-month period
  • is expected to be more than £85,000 in the next 30-day period

VAT Taxable Turnover

VAT taxable turnover is the total value of everything you sell that is not exempt from VAT.  Therefore, you need to include sales taxable at the standard, reduced and zero rates.

You must register for VAT with HMRC if turnover is greater than the current registration threshold (£85,000) in a rolling 12-month period. This is not a fixed period like the tax year or the calendar year – it could be any period, for example from the start of June 2020 to the end of May 2021.

How To Register

You need to register your business on the HMRC virtual portal and include any partner company or group of companies that operate under the same VAT number. After creating your VAT online account, also known as a Government Gateway account, you will receive your VAT registration number once your registration has been confirmed. This is issued within 30 days.

On occasions, online registration is not allowed. In these cases, you need to register by post, for example, if you are an EU Business that trades with Northern Ireland.

VAT Certificate

When you register, you will be sent a VAT registration certificate. This confirms:

  • your VAT number
  • when to submit your first VAT Return and payment
  • your ‘effective date of registration’ – this depends on the date you went over the threshold, or is the date you asked to register if it was voluntary

You can reclaim the VAT you’ve paid on certain purchases made before you registered.

Using An Agent

You can also use an agent or an accountant to submit your VAT Returns and deal with HMRC requests.

Voluntary Registration

You can register voluntarily if your business turnover is below £85,000. You must pay HMRC any VAT you owe from the date they register you.

Exception From Registration

If you exceed the VAT registration threshold (£85,000) but believe that your VAT taxable turnover will not exceed the deregistration threshold, in the next 12 months, you can apply to HMRC for an exception from registration. This can be done on form VAT1. This may be the case if you have a one-off sale that is particularly large.

Your Responsibilities

By registering in the HMRC online account, you must:

  • Charge the correct amount of VAT for your products and services
  • Pay any due VAT to HMRC and submit VAT returns
  • Keep VAT records

Making Tax Digital (MTD)

If your VAT taxable turnover is greater than £85,000, you must keep records digitally using a compatible software package.  This way, you keep your digital records safe and have access to all your data in one place.

From 1 April 2022 all VAT registered businesses must sign up to MTD, whatever their turnover.

Need More Advice And Support With VAT For Your Business?

Get in touch with NKY Consulting to find out how we can help with VAT and other compliance services.