Do I need to be registered for VAT?
This question often comes up with clients, and as with most tax related questions the answer is not straight forward.
There are two types of scenario where a business may become VAT registered:
1. Compulsory registration A business must register for VAT if either:
at the end of any calendar month its taxable supplies have exceeded the VAT registration threshold (currently £85,000).
or with immediate effect if the businesses taxable supplies will go over the VAT threshold within the next 30 days.
Taxable supplies is not necessarily total sales. Taxable supplies are any business supplies that would be subject to VAT, be it 20%, 5% or even 0%. Some goods and services are exempt for VAT such as education and training, therefore would not count towards the VAT registration limit.
2. Voluntary registration
There are several circumstances where a business may consider voluntary registration, as it may still be beneficiary to register, these can include:
To recover VAT on costs when a business sells zero rated good or to other VAT registered businesses.
To give the business scale and substance, particularly when bidding for contract work.
Where the use of VAT schemes such as the flat rate scheme can be beneficial to the business.
For most businesses (particularly retail) VAT registration is not a good thing. However, in some circumstances there is a benefit to becoming VAT registered. If you are unsure then please contact us to review you VAT status.