Obligatory VAT registration
Companies that are trading must register for VAT if taxable sales exceeded £85000 during the last 12 months. Registration is also obligatory if you expect your company's taxable turnover will exceed £85000 in the 12 months ending in the next 30 days (this is a rolling 12 month period).
Zero rated items must be included as taxable sales included in the turnover calculation. Zero rated items are those which attract a 0% vat rate:Examples include books, newspapers, childrens clothing, childrens shoes and motorcycle helmets. Exports are also zero rated.
Exempt sales are not included in the turnover calculation. Exempt items are not subject to vat at all; Examples of exempt supplies include finance, credit, fundraising for charities and residential property sales.
You can apply for an exception if you believe that your taxable turnover has only exceeded the registration threshold temporarily. You will need to demonstrate that your taxable turnover will drop below the deregistration limit of £83000 p.a in the next 12 months. A successful application will allow you to avoid registration.
If you are late in applying for VAT registration, you will have a liability. Your liability will be the amount of VAT you should have accounted for had you registered on the correct date. You may also be charged a penalty depending on the delay.
Voluntary VAT registration
Companies can register for VAT even if their taxable sales are significantly below £85000 p.a. For some small companies there may be advantages;
- Providing a company can charge its customers VAT on its goods and services (without losing sales) it will be able to reduce its costs by reclaiming VAT incurred on its purchases.
- VAT registration gives an impression of an established company. If a company's competitors are all charging VAT, it will raise suspicion if it is not charging VAT.
Overseas businesses selling to the UK
If you sell goods or services in the UK from outside the UK, you must register for VAT. You are obliged to register as soon as you supply the taxable products and services or if you anticipate making sales within the next 30 days. There are no financial thresholds for registration for non-UK businesses.
Reclaiming VAT paid on pre-registration purchases.
A company can reclaim VAT that it has paid on purchases made before registration as follows:
- Vat incurred up to four years prior to registration in respect of goods still held by the company at the date of registration. This also applies to products that have been used to make other goods.
- Vat incurred on services up to 6 months prior to the date of registration.
You can apply for our VAT registration service by logging into your account with us or by placing your order here and completing the information required £26+vat