Everything you need to know about VAT

VAT or Value Added Tax is crucial for businesses. Not only should you register your business for VAT but also ensure that you comply with the rules. You must be familiar with the payment and charging procedure. As a newbie, it can be challenging to know the VAT rules. So before enlisting your business, you should know the charges, scheme, and documents. Besides, you must submit to HM Revenue & Customs (HMRC).

Anyone involved in small businesses can be easily intimidated by the idea of VAT, and this can apply to you when you’re struggling to manage your paperwork. You must also be familiar with the rules of HMRC so that you can register for VAT. If you do not pay the VAT in time, you will need to pay a hefty fine.

The article below will provide you with all the information you need about VAT.


What is VAT?

VAT refers to the tax on the goods and services that the businesses will need to pay during the invoice. The companies need to pay VAT to the HMRC. Currently, the standard rate of VAT is 20%. The VAT revenue must be paid to the HMRC once every three months. Your business must also file a VAT return if it wishes to reclaim the money.

Businesses must know that the standard rate doesn’t apply to businesses of all sizes. Some services or goods exempt from VAT include solar panels, gas boilers and more. On the other hand, there are other services wherein the VAT rate will be lower. It is advisable to follow the HMRC guidelines to know the VAT rate for services.

However, not all businesses in the UK will need to register for VAT. HMRC has set a threshold, and businesses that cross that threshold must register and pay VAT.


When should businesses need to register for VAT?

If your annual taxable income exceeds £90,000, you should register for VAT, referred to as compulsory registration. In many cases, you will need to reach the threshold to make the payment.

If you register before reaching the cash flow threshold, it is known as voluntary registration. It will, however, play an important role in boosting cash flow. You can also file for claims based on the input. However, you must refrain from filing if the customers do not have VAT. It will harm your business. As a result, the customers may need to pay significantly more.

You should consider registering for VAT if your business meets the following conditions:

  • Your business is based out of the UK.
  • You are based out of the UK.
  • You are supplying goods and services across the UK.

You must go through the non-established-taxable-persons guidelines to make the right choice. You must pay the VAT to the HMRC within the date they owe you money.


Why should you register for VAT?

As soon as the company reaches the VAT threshold, it would help if you headed towards registering the business for VAT. If you have a lower turnover, you can still opt for registering for VAT. There are several reasons why you must consider registering your business for VAT.

Some of the common reasons why you should be registering for VAT include the following:

However, not all businesses in the UK will need to register for VAT. HMRC has set a threshold, and businesses that cross that threshold must register and pay VAT.

  • Your business can claim the VAT for any products they buy, and your business must pay a specific VAT when purchasing services or products. If you are registered for VAT, you can know what you are charged for. Then, you can also head out to claim the VAT.
  • When your business is registered for VAT, it will positively impact your business. Most companies registered for VAT seem mature and have a turnover of more than £90,000. You will likely attract more customers as most perceive your business as efficient.

How to register for VAT?

When registering your business for VAT, you must consider different factors. You should check the VAT threshold and register with HMRC accordingly. You might as well hire an agent or account who will submit the VAT return on behalf of the company.

While you can register easily online, you might as well choose to do it via post. Given below are the steps you need to follow to register for VAT:

  • Visit the tax registration website of HMRC so that you can start the process of registering for VAT.
  • If you are registered with HMRC, you will have a Government Gateway Account. You should click on the I have an account login option. You should click on the Create an account option if you do not have a Government Gateway account.
  • Enter the Government Gateway ID and password. You will need to scroll to the bottom of the account to find details about the scheme, duty and tax.
  • Since you are registering for VAT, click on the VAT services option. There are different options available and choose from one. You should click on Continue.
  • In the next step, click on the VAT option and continue with the registration process.

If you cannot register for VAT online, you can apply in paper format. The HMRC website has a VAT1 form available. Fill and post it to the HMRC office. They will take the process ahead for the registration of VAT.


What documents do you need to get a vat?

If you have started your business in the UK, you must register for VAT. You must submit all the documents accurately. Given below are all the documents that you need to submit for registering for VAT:

  • A unique tax reference number.
  • Business bank account details.
  • Business registration details.
  • Details of business.


There is a specific deadline for the payment of VAT. Businesses should consider registering for VAT depending on the demands of the company. You must file the VAT return in time to opt for a claim or pay it back. Make sure to log in to your account to send the VAT return. The concept of VAT can be slightly confusing, which is why you will need the help of professionals.

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