How to Register for VAT
VAT is a value-added tax, and it’s the sale tax paid in the UK and in most other European countries. It’s a tax that’s paid when you make a purchase, and it’s paid on the added value to the cost of producing the product or service you’re purchasing.
The company that wants to pay this tax needs to register for it. It’s done rather simple, and it can be done even if you’re below the threshold after which the VAT registration is mandatory. At this point, that’s at 85.000 £ in turn over.
Should you do it?
Before we get into how to register for VAT you should first ask yourself, should you register for VAT in the first place. Some companies have no choice in the matter since the registration is mandatory for the companies with a yearly turnover of over 85.000 £ However, there are those who register before that.
This is because the VAT paid on the items that are needed for the company to run, you get a refund from the government. That’s only possible if you’re a VAT paying business yourself.
How to register?
Most companies can register online, and that’s simply done on the VAT web page where you’ll get your own number with which you can identify in the future. That’s can also be done by some sort of agent representing the company, but they’ll have the proof that they are authorized to do so. It’s usually an accountant.
The process is rather simple if you have the proper paperwork, mostly the ones that prove how and when you get paid as a business and how you get your income overall. It can be done without getting up from a desk if you’re organized enough.
Who can’t do it?
There are companies that can’t register for VAT online since that option simply isn’t allowed for them. If you’re one of these, you’ll need to register using the HMRC physical address and send your records that way. This takes a bit longer than it would when you do it online.
- Those who want to apply for a ‘registration exception.’
- Those who are joining the Agricultural Flat Rate Scheme
- Those who are registering the divisions or business units of a body corporate under separate VAT numbers.
They are applying using VAT1A, VAT1B or VAT1C forms depending on the type of business.
When to do it?
That depends on the reason you’re registering for VAT in the first place. If you’re registering because you went over the threshold of £85.000 a year in turn over you, have 30 days after that has happened to register for VAT. There are penalties if you don’t.
There’s no rule as to when to do it if you’re doing it on your own without having the right turn over. It’s best to do it at the end of the year so that you get to have a clear system for the year.
Purchases made before registration
The main benefit of registering for VAT if you don’t have to do so is the fact that you get the refund on the purchase made for the items needed for the business. This presents a question of what happens with the purchase you’ve made before registering and that fall under these guidelines.
The rules cover this purchase, and they state that the goods that have been bought for 4 years before registering could be refunded as well. The services that are essential for the business that has been purchased six months before registering can be refunded as well.
It’s possible to cancel your registration just as simple if you’re not above the £85.000 threshold. If you are, you won’t be able to cancel. There are also cases in which it’s mandatory to cancel the registration, and that’s when you join a VAT group and when you stop trading in the field in which VAT is paid.
This needs to be done within 30 days of your circumstances changing. If you’re cancelling on your own, you can do it whenever you want it, and that can be done online as if when you’re registering.
A business can register for VAT at any point, and it needs to register once it goes over the £85.000 in yearly turnover. This can be done online by the company owner or by the company accountant depending on your arrangement, and there are a few companies that are excluded from using the online services.
It’s also possible to cancel your registration the same way. It’s up to you to decide do you want to register if you don’t have to and there are benefits in terms of refunds if you do so.