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Should I register for VAT?

VAT Registration Options

In this article, we’ll help you decide whether you should register for VAT and what scheme is best for your business.

What are my options?

Most clients have three options:
  • Don’t register for VAT
  • Register on standard rate VAT
  • Register on the VAT Flat Rate Scheme

How do I know which is best for me?

Generally, when deciding whether to register and on what scheme, you need to look at your turnover, the type of clients you have, and your vatable expenses.

The table below indicates when it’s best to register for a particular scheme, however it should only be used as a guide.

Vatable expenses
Client type
Suggested VAT option
Less than £83,000
Less than 1.5% of turnover
Mostly non-VAT registered customers
Don’t register for VAT
More than 1.5% of turnover
Mostly VAT registered customers
Register for standard rate VAT
More than £83,000
Less than 1.5% of turnover
Register for Flat Rate VAT

When do I need to register for VAT?

You’re required to register for VAT when:

  • Your VAT-taxable turnover (i.e. the total of all sales that aren’t exempt from VAT) exceeds the current threshold within a 12-month period.
  • You expect your VAT-taxable turnover to exceed the threshold in a single 30-day period.
  • You only sell goods or services that are exempt from VAT, but you purchase goods to use in your business to the value of more than the threshold from VAT-registered suppliers in the EU.

You need to register for VAT within 30 days of meeting any of these criteria.

If over the threshold, when do I need to start charging VAT?

When your turnover reaches the threshold in a rolling 12 month period, you must start charging VAT from the first day of the second month after you exceeded the threshold.

For example if, on 30th June 2017, your sales for the previous 12 months are £85,000, your VAT registration date will be 1 August 2017.

When you expect to exceed the threshold in a single 30-day period, you must start charging VAT immediately.

What happens if I don’t register for VAT when I should?

If you’re late in registering, HMRC will retrospectively register your business from the date you should have started charging VAT. You’ll need to add VAT to all sales made from this retrospective date, regardless of whether you actually charged your clients VAT. HMRC may also issue you with a financial penalty.

Can I register for VAT voluntarily?

If your VAT-taxable turnover is less than £83,000 over a rolling 12-month period, you can register for VAT on a voluntary basis.

What are the advantages of registering voluntarily?

Once registered for standard rate of VAT, you’ll be able to reclaim the VAT on your expenses.

What are the disadvantages of registering voluntarily?

If the majority of your clients are not VAT registered themselves, you may want to avoid registering for VAT voluntarily

 As soon as you register, you’ll need to add VAT to your invoices, adding 20% to the overall price your client pays. Any clients you have who aren’t VAT registered won’t be able to claim this back.

This means you’ll either become more expensive to these clients or you’ll need to swallow up the VAT cost yourself.

How often do I need to file a VAT return?

You’ll need to file a VAT return every 3 months. If you do not file a return when it is due, you’ll incur a penalty from HMRC.

If you’re a Crunch client, our software automatically generates your VAT return. You’ll be notified when a return is ready. Simply let us know you’re happy with it and we’ll file on your behalf.

Will it affect my ability to monitor my profit?

When you’re VAT registered, it can be more difficult to keep track of your cashflow and profit.

However, as a Crunch client, we’ll calculate your VAT liabilities automatically, so you’ll always have an up-to-date picture of your accounts.

Last Updated: 10 Mar 2017 03:34PM GMT

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