A Simple Guide on VAT Registration

VAT (Value Added Tax) is a consumption tax that is assessed based on the value added to goods and services in both the United Kingdom and European Union. 

VAT registration is the process by which your company is registered with the government to showcase that it is active in production and sales. 

The current threshold for the year 2021 is £85,000, and so this may not be a necessary step for new businesses. We also suggest that you check the threshold as it is subject to change every year. 

Why should I register for VAT?
If you own a business with a VAT taxable turnover of £85,000 then it is required by law for you to register for VAT. A VAT taxable turnover refers to the total amount of all the goods and services that were sold that is not VAT exempt. You may still register even if your business has not reached this threshold.

There are many advantages of registering for VAT, and that includes:

  • giving a more established image to your business, thus boosting the appeal of your company
  • reclaiming VAT on most of the goods and services that your business has purchased from other companies

As there are advantages, there are also disadvantages that you should be aware of before registering for VAT. For instance,

  • prices of goods and services are subjected to increase
  • there is a chance that you may have to pay fines should you fail to file your company’s VAT to HMRC on time

How can I register?
The VAT registration process is not complex but can be easily complicated if filed incorrectly. It is recommended to delegate this process to an accountant as they are familiar with the accounting jargon and are up-to-date with the process.

It is also important to include the right information as well, so ensure that your calculation is correct; you must add together the total value of sales that are not VAT exempt. According to HMRC, these are exempt:

  • building work that costs over £100,000
  • business goods used for personal reasons
  • goods and services that your company bartered or presented as gifts

In addition to this, you must also include any zero-rated items as well. These refer to goods that are VAT-taxable but the rate of VAT that is charged to our customers remains at 0%. Some of these goods may be:

  • books and newspapers
  • children’s clothes and footwear
  • majority of goods that were exported from Northern Ireland to a country outside of the European Union and the United Kingdom

A majority of businesses can register online. However, there are certain requirements to apply online, if these are not met, then your business must apply through paper form. For instance, it is required of you to file for VAT through the post if:

  • you wish to receive a ‘Registration Exception’
  • you are joining the ‘Agricultural Flat Rate Scheme’
  • you are trying to register different business units with separate VAT numbers

Once the VAT registration is complete, you will receive a certificate within 30 working days but it may take longer than usual. Depending on how you registered for VAT, you will obtain a VAT registration certificate online or by post. 

Can I cancel my VAT registration?
It is mandatory to cancel your VAT registration if your business is no longer eligible to be registered. To continue the cancellation process, you must contact HM Revenue & Customs (HMRC) if your company’s VAT taxable turnover no longer reaches the current threshold. This can be done online or you can complete a VAT7 form by post. 

HMRC will then send a confirmation to you online or by post after 3 weeks.

The next step towards completing the cancellation of your company’s VAT registration is to submit one final VAT Return for the period up to the official cancellation date. 

If you realised that you did not need to cancel, HMRC will register your business again but you must also account for all VAT that should have been paid during this period. 

Persona Finance is well-equipped with the right knowledge and skills to simplify your accounting needs. Contact Persona Finance at [] for more information on VAT registration or for other business/ accounting queries.
Accounting and Finance