If your UK established business earns over £85,000 in taxable turnover, you must register for VAT in the UK. Registering your business for VAT ensures you comply with VAT regulations and enables you to charge VAT on sales, reclaim VAT on expenses and submit regular VAT returns. Whether registering for the first time or considering voluntary registering, here we have all the information you need to get started.
What businesses need to register for VAT?
Businesses in the UK that must register for VAT are those with an annual taxable turnover of more than £85,000. This includes sole traders, partnerships, and any other type of business. If you fail to register for VAT, you may face hefty fines. Businesses that exclusively sell VAT-exempt goods and services cannot register for VAT. However, those businesses that have a taxable turnover of under £85,000 have the choice to register voluntarily.
A sole trader may have several income streams from diverse range of activities but all income would fall under the single identity of the sole trader.
For non-UK resident companies, the VAT threshold is Nil, therefore a non-resident entity making supplies of goods from stock held in the UK would need to register upon the first sale made.
How to register your business for VAT
Registering your business for VAT is relatively straightforward, depending on the VAT scheme you apply for and whether you can do it yourself or through an accountant/agent. There are two keyways to register for VAT; online or with VAT1 paper form although HMRC much prefer online submissions, which can be processed quicker. The paper form still exists mainly for overseas traders with complex needs. As any VAT registered business will also have to comply with Making tax Digital and file its VAT returns via online software, choosing a paper application route makes little sense.
Choose a VAT accounting scheme
When registering your business for VAT, you’ll be asked to provide the VAT accounting scheme you plan to use. HMRC uses accounting schemes to calculate whether you owe VAT or are eligible for a refund. Here are the main VAT schemes:
- Standard VAT Accounting Scheme – Most businesses must use this type of scheme. You record the VAT collected on each sale and paid on each purchase based on the transaction date. You will then submit your VAT return each quarter to HMRC.
- Annual Accounting VAT Scheme – This scheme involves submitting one VAT Return a year and making quarterly payments based on your previous return or estimated figures.
- VAT Flat Rate Scheme: Certain small businesses can use a simplified accounting method and pay a percentage of their turnover to HMRC as VAT, however with Making Tax Digital and changes relating to traders with low overheads, the benefits of this scheme is not for everyone.
- VAT Cash Accounting Scheme Under this scheme, instead of VAT being declared to HMRC per invoice date, you use payment date, this affords cash benefits .
- Retail VAT Scheme –There are various conditions and methodologies depending upon the turnover of the business.
- VAT margin Scheme – These apply VAT on the difference (margin) between the bought in price of the item and the selling price of the item, often seen in use with 2nd hand good shops, antiques, art, second hand cars and vans and similar.
Get your details ready to complete the VAT registration
VAT registration is relatively simple providing you have the correct information and documentation. Before you begin, ensure you have the following to hand:
- National Insurance (NI) number of a Director (or Partners or of the sole trader)
- Unique Tax Reference number (issued by HMRC)
- Company Registration Number
- Business name and contact details
- Details of all associated businesses within the last two years
- Business bank account details
- Your estimated turnover
- VAT accounting scheme you will use
- If you bought the business as a going concern, you’ll need to provide details of the seller
You don’t have to complete the VAT registration process in one go. You have the option to save your progress and come back to it later.
Register for VAT online
Registering for VAT online is a straightforward process. You will need a Government Gateway user ID and password. If you don’t have this already, you can create one when you sign in for the first time. You also have the option to use an accountant to act as a tax agent and submit your VAT Returns on your behalf.
You will need a government gateway for setting up Making Tax Digital so it makes sense to do this at the application for VAT stage.
Registering for VAT using the VAT1 form
While most businesses can register for VAT online, certain situations require offline registration using the VAT1 form. If online registration is not applicable, you must complete the VAT1 form and post it to HMRC.
What happens once you’ve registered for VAT?
After registering your business for VAT, you’ll have an online VAT account. Within 30-50 days, you should receive your VAT certificate, which includes your VAT number and the date your first VAT Return and payment is due. Once you’ve received this, you can:
- Add VAT to your invoices
- Issue VAT invoices
- Maintain a VAT account and keep digital VAT records
- File VAT returns and pay HMRC any VAT you owe
Whilst waiting for a VAT number to be confirmed by HMRC, the business is deemed to be VAT registered from the date specified on the VAT registration application, the business must therefore factor into quotes or sales that VAT is applicable, even though the VAT number has not yet been issued.
Get in touch
Registering for VAT is crucial to ensuring your business complies with tax regulations. Whether mandatory or voluntary, you must understand the process of registering your business and the different VAT schemes available. By registering and managing your VAT effectively, you can avoid expensive penalties, claim the VAT back and fulfil your tax obligations. To find out more about how to calculate VAT in the UK, or more about the VAT registration process contact our VAT team today.
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