When first setting up your business, there are multiple decisions to make – and a key consideration will be whether to register the business for Value-Added Tax (VAT), the tax that’s added onto the price of certain goods and services.

When does VAT registration become mandatory?

HMRC state that it’s compulsory for a business to register for VAT when the turnover in any 12 month ROLLING period reaches £85k. The key word is ‘rolling’ – this applies to any continuous 12 month period, not simply it’s financial year. Because this is the case, it’s important to keep a close watch on your turnover and start making plans for VAT registration as the time gets closer. As your accountant, we’ll help you monitor this and advise a strategy for financial and business success.

Is it better to be VAT-registered?

From a customer perspective, and where they are VAT Registered, you’ll always be better off registering. There will be some minor admin work to do, however, but this can be factored in.

You can add VAT to your selling price without it costing your customer more – VAT registered customers simply claim back the VAT from HMRC. You can also reclaim VAT on your own purchases and expenses in the same way. There is the option of the flat-rate scheme for a more straightforward alternative, which we can advise on.

What happens if my customers aren’t VAT registered?

Do you work with a consumer customer base who are likely to be VAT registered? In this circumstance if you charge VAT to them they’ll end up paying more for your goods and services, depending on the rate of VAT at the time. This could affect your price competitiveness in the market if all of the VAT addition is passed on.

If you are below the £85k threshold and have a choice on VAT registration, consider the impact on reclaiming the VAT on your purchases and weigh up the balance of this. We can assess this impact and provide an appraisal and forecasts as necessary.

Why would I register early for VAT?

Good question. Legally, you need to register when the business reaches that rolling 12 month sales total as explained above. But there may still be advantages in registering early or even if the business has no plan to reach the VAT threshold.

There is sometimes a perception about a VAT registered business appearing more substantial and professional. And of course there may be the opportunity to claim back some VAT on purchases, particularly if these are for significant assets. Talk to us before making a voluntary VAT Registration decision, as sometimes these could lead to consequences elsewhere.

Talk to us about registering for VAT

For a new business in particular, even if you anticipate that sales will be in excess of £85k in the first year, mandating VAT Registration, there may be some advantage in delaying registration until absolutely necessary. Equally, the benefits of voluntary registration can be worth it.

For a complimentary Discovery Call to discuss the most appropriate level of support, a personalised quote and a guarantee of our best possible service, please complete the form below and one of our senior advisors will contact you.
Or if you prefer, please call 01442 560050 for our Northchurch Accountants office or 01296 681381 for our Wingrave Bucks Accountants office.

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