Reasons to Register for VAT


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According to HM Revenue and Customs registration for VAT is compulsory in certain situations, but is also available on a voluntary basis subject to specific criteria. Depending on the type of business there can be specific benefits to registering for VAT on a voluntary basis before you reach the financial threshold. The rules for both are summarised below.

You MUST register for VAT when

The value of your taxable supplies exceeds the registration threshold.If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £68,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT.

You MAY wish to apply to register for VAT on a voluntary basis when the value of your taxable supplies is below the registration threshold

If the value of your taxable supplies is below the threshold, and you want to register for VAT on a voluntary basis, you will be able to reclaim VAT on purchases. Anyone who registers will also have to account for tax on their sales, where appropriate. 

Advantages of voluntary registration for your company:

  • Customers and suppliers may view your company as a bigger business
  • It will help to reduce your business costs as the VAT charged by some or all of the company's suppliers can be claimed back.
  • If all or the majority of your company's sales are at the zero rate, the business would be eligible to reclaim the VAT it has been charged.
  • It would reduce the risk of penalties if you forgot to register your company before it exceeds the registration limits.

Disadvantages of voluntary registration for your company:

  • The extra burden on administration, submitting returns, making the calculations
  • Customers may be lost if they can't claim back the VAT you charge on top of your prices.  
  • Preparing and maintaining accurate VAT accounting records

The benefits and drawbacks of early registration have to be considered in the light of what is best for the company and the people who run it.  If you feel that this will benefit your business, you should complete the application form. 

Financial expert Peter Charlery from PDC Online Accountants offers one to one financial advice sessions.  He has many clients who have taken advantage of voluntary registration.

Peter Charlery, FCCA MBA, PDC Online Accountants  Tel: 0151 281 6162
Web: www.pdconline.co.uk
Email: [email protected] 

 

 

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