Should you apply for voluntary VAT registration ?
If your taxable turnover is below £85,000 you don’t have to register for VAT. However, you may be eligible to apply for ‘voluntary VAT registration’ and one or more VAT schemes.
There can be advantages in registering for VAT such as…
- increased business credibility;
- potential savings if you have zero-rated sales but you can still reclaim VAT on your purchases;
- savings if you mainly supply other VAT registered businesses so they don’t mind being charged VAT. You can then reclaim VAT on your purchases;
- Potential savings on the Flat Rate Scheme , but only if you have a favourable flat rate for your industry. Watch out if you don’t buy many goods – you may have to use 16.5%.
However, you do need to weigh up the benefits against the hassle factor of completing VAT returns. Plus you’ll need to do a little cashflow planning to pay the VAT due every quarter. If you supply the general public you will probably not want to register for VAT as this simply puts your prices up by the rate of VAT.
There are various VAT schemes, mainly for small businesses…
- Cash accounting – If your taxable turnover is under £1,350,000 a year you can arrange to account for VAT on the basis of cash received and paid. The normal scheme is based on the invoice date or time of supply.
- Annual accounting – You can complete one VAT return per year rather than four if your turnover is under £1,350,000. You must also make nine payments on account throughout the year, and a balancing payment with the VAT return.
- Flat rate scheme – This is for businesses with a turnover of under £150,000. It saves on administration because you just pay a set percentage of your VAT inclusive turnover based on your business sector. The normal scheme accounts for VAT on each individual “in and out”. The Flat Rate Scheme can reduce the VAT you pay in some situations. See our Flat rate scheme calculator and guide for more details.
- Retail schemes – These apply to retailers and offer an alternative if it’s not practical to issue invoices for a large number of supplies direct to the public.
When you must register for VAT
When your sales for the past 12 months exceed £85,000, you have to register for VAT within 30 days of going over. Not within 30 days of noticing! So, at the end of every month, you need to work out your total sales for the 12 months leading up to the end of that month. If it’s over £85,000, you have to register for VAT by the end of the next month and start adding VAT to your sales from then on. You’ll also be able to claim back VAT on your costs, so you may be able to lower your sales price.
How We Can Help You
We can assist you with Voluntary VAT Registration by…
- helping you register for VAT
- advising on suitability of VAT schemes
- assisting with completion of VAT returns
- setting up your accounting system to deal with VAT
- helping remotely with any disputes with HM Revenue & Customs
- providing VAT planning advice for complex transactions such as when buying property.