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What should I do when I become VAT registered?

Well done! You have put in the hours and built a successful business enough to be earning almost £85,000 in the last 12 months. Maybe you have done this alone or you now have a couple of employees, either way you have some decisions to make.

Register for VAT and get the right software

You must register for VAT if your VAT taxable turnover goes over £85,000 (the ‘threshold’), or you know that it will. Your VAT taxable turnover is the total of everything sold that is not VAT exempt.

You can also register voluntarily.

Compulsory registration

You must register for VAT if:

  • you expect your VAT taxable turnover to be more than £85,000 in the next 30-day period

  • your business had a VAT taxable turnover of more than £85,000 over the last 12 months

You might also need to register in some other cases, depending on the kinds of goods or services you sell and where you sell them.

You need to have MTD compliant software to be able to submit your returns to HMRC. This can be Xero or QBO and we can include the cost of this in our monthly subscriptions.

1. Decide which months you submit your returns

Most businesses can register online - including partnerships and a group of companies registering under one VAT number.

By doing this you’ll register for VAT and create a VAT online account (sometimes known as a ‘Government Gateway account’). You need this to submit your VAT Returns to HM Revenue and Customs (HMRC).

2. Which scheme to choose?

There are a few schemes to choose from, Standard ( the most common), cash, flat rate, margin rate and Annual. We will discuss the best one for you and your business when we register you.

3. Can I claim VAT back on previous purchases?

There’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

  • 4 years for goods you still have, or that were used to make other goods you still have

  • 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

You should reclaim them on your first VAT Return (add them to your Box 4 figure) and keep records including:

  • invoices and receipts

  • a description and purchase dates

  • information about how they relate to your business now

4. When can I deregister?

You must cancel your registration if you’re no longer eligible to be VAT registered. For example:

  • you stop trading or making VAT taxable supplies

  • you join a VAT group

You must cancel within 30 days if you stop being eligible or you may be charged a penalty.

You can ask HM Revenue and Customs (HMRC) to cancel your registration if your VAT taxable turnover falls below the de-registration threshold of £83,000

5. What if I do not register?

If you register late, you must pay what you owe from when you should have registered.

You may get a penalty depending on how much you owe and how late your registration is.

6. Should I just work less?

Providing you haven’t yet reached the £85k threshold in the past 12 months, you could choose to slow down and keep under the threshold.

How can I help?

We offer a range of services to help you with your VAT requirements below is just a few examples:

  • Register for VAT

  • VAT check and submit service - from £100 per quarter (or as part of one of our packages)

  • Managing invoices and receipts and uploading to software

  • Deregister for VAT

Book below to find out more


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