Value-added tax, abbreviated to VAT, is an essential consideration for every company. It’s an indirect tax that can be added to goods and services at each stage in production.
VAT is also considered a consumption tax because the consumer bears the entire tax amount at purchase. VAT is something all businesses need to be aware of with a fair understanding of what’s involved.
Do I need to register for VAT?
If your business meets the threshold for value-added tax, you’ll need to register for VAT to avoid fines and legal action.
However, a company can also voluntarily register a business for VAT. Registering a business for VAT can be a positive process to promote growth in your business.
Companies can also reclaim VAT on goods and services but may end up having to increase the prices to customers if they have to pay more to HMRC, subject to their input and output tax.
When should I register for VAT?
In most cases, you can register for VAT online or with the help of a reputable accountancy service.
It can also be done in paper form using the VAT1 document.
To register for VAT, you’ll need details of businesses bought or transferred, if applicable. You’ll also need:
- Bank details
- Unique Tax Reference (UTR)
- Associated businesses within the last two years
- Company number
- Registered address
Businesses will need to quote the VAT registration number on receipts, where the value-added tax is applied to services and goods.
VAT registration and schemes
When considering if VAT registration is right for you and your business, it’s important to investigate what VAT schemes work for you.
If you need further advice and help during the registration process, it’s worth thinking about employing the services of an accounting company like Accountants East London.
There are many retail schemes for VAT available to businesses, two of which include:
Cash accounting scheme
Smaller businesses typically use these types of schemes.
With the cash accounting scheme, businesses only need to pay HMRC the value-added tax accrued in a quarter, but not VAT for invoices that await payments.
Your turnover must also be lower than £1.35 million to use this scheme.
Annual accounting scheme
With this scheme, companies don’t need to make returns every quarter. Instead, they can offer advance payments towards the cost throughout the financial year.
You need to make one return on VAT and pay the remaining balance or claim refunds for any overpayments.
This scheme is only available to businesses that receive an annual turnover of under £1.35 million.
VAT registration threshold
In the United Kingdom, the VAT registration threshold is £85,000. If a company exceeds this annual turnover amount, it may face fines if it doesn’t complete a VAT registration within 30 days.
As such, it’s essential to remember that the threshold changes, so every business should be aware of the current limit for each financial year.
We hope you’ve found this article useful, but if you’re still unsure about whether or not you need to register for VAT, get in touch with us today – we’d be happy to help.