When starting up a new business the concept of registering for VAT is probably not at the forefront of your mind, after all, it’s only big businesses that pay VAT, right?

Well, the truth is that VAT should be something that’s always in the thoughts of sole traders, partnerships and limited companies, as the VAT threshold is not that high.

When to Register?

Registering for VAT becomes compulsory as soon as your business’s turnover reaches a certain threshold, and this threshold rises each year slightly. One mistake small business owners commonly make is to wait until the end of the quarter, or even for their annual accounting period before registering for VAT, but this is too late. The rules dictate that you must register for VAT as soon as:

  • Your VAT taxable turnover (the total value of everything you sell that isn’t exempt from VAT) is more than the  threshold in any 12 month period
  • you expect to go over the threshold in a single 30 day period

Registering for VAT voluntarily is also an option for small businesses with a taxable turnover that is not expected to exceed the threshold, and in some cases, it can be beneficial to do so.

How to Register

Most businesses can register for VAT online, and this is the easiest way to file VAT returns and make payments. To register for VAT, you’ll need to create a VAT online account (sometimes known as a Government Gateway). You can then submit your returns and make payments through this account.

Registering for VAT is a relatively simple process and something you can do yourself. However, you could also appoint an accountant to register for VAT and submit your returns on your behalf. To register for VAT, you will need to provide a few details about your turnover, business activity and bank details. The date you register will be known as your ‘effective date of registration’, and you will have to file returns and pay VAT from that date.

From your registration date, you will need to start raising invoices with a total figure that includes the sale amount and the VAT amount, and you must include your VAT registration number on your invoice. You will also receive a VAT registration certificate, but you must not wait for the certificate to arrive before you start charging VAT.

What Happens if you Fail to Register for VAT?

If you fail to register for VAT at the appropriate time, you could be liable for a late registration penalty. Ignorance is not an acceptable excuse to avoid a penalty. The longer the period that you failed to register for VAT, the greater the penalty will be. However, a penalty can be mitigated or cancelled if you can prove there are genuine circumstances which prevented you from registering on time.

For confidential advice on tax problems in your business such as not being able to pay your corporation tax bill, or failing to make PAYE payments on time, please feel free to contact us.