Should I voluntarily register for VAT?

In the UK, there is no compulsion upon businesses of all sizes to register for VAT. The companies that cross the threshold set by the HMRC will only need to register for VAT. Furthermore, the registration process will also be optional for small businesses, entrepreneurs and freelancers.

When voluntarily registering for VAT, you must know the advantages and disadvantages. The threshold setup can have significant benefits. This article will cover information on whether or not you should voluntarily register for VAT.

Should I voluntarily register for VAT?

Who should register for VAT?

VAT, or Value Added Tax, is one of the essential elements. Almost all businesses can register for VAT. Some specific businesses that can register for VAT include sole traders, partnerships, associations, limited companies and clubs.

One of the most common myths regarding VAT registration is that only limited companies can register for it. If your business has more turnover than the threshold, it can register for VAT. However, they must also keep a check on the legal structure.

Can you voluntarily register for VAT?

Yes. Businesses of all sizes can register for VAT irrespective of business turnover. When businesses reach a turnover of £85,000, they must register for VAT. This is compulsory for VAT registration. On the other hand, businesses registering for VAT, even when they’ve not met the turnover threshold, are referred to as voluntary VAT registration.

What is the process of voluntary VAT registration?

The process for voluntary VAT registration is the same as that of regular businesses. Most businesses prefer registering for VAT online, considering all the benefits that it has to offer. When you register for VAT online, you need to create an account. In this account, you will be maintaining the track record of your VAT.

Sometimes the online registration procedure will fail. Therefore, in this situation, you will need to register for VAT offline. You can mail all respective documents to the authorities. Your business must register under the separate VAT numbers division if it needs a registration exception.

Why should businesses opt for voluntary VAT registration?

When you want to register for VAT voluntarily, you must know that it comes with various benefits. Many small businesses register for VAT voluntarily even when they have not crossed the threshold. Usually, they register for VAT even before they are legally obliged.

Registering for VAT voluntarily can bring significant benefits to the business. Some of the common benefits of voluntary VAT registration include the following:

  • You can claim VAT after buying any goods or services from different businesses.
  • Every VAT-registered business receives a VAT number. They can display it on their letterheads, invoices and various business stationery. This can help to establish the credibility of the organisation. Various companies do not want to do business with a non-VAT registered business. Therefore, having VAT registration will give you an upper hand, ensuring more business.
  • If you have sufficient evidence about VAT registration, you can also backdate it. Furthermore, if required, you can also supply the same to HMRC. Therefore, the registered businesses can reclaim the VAT on any equipment they are still using.
  • If you have customers who are VAT registered, they can reclaim it from HMRC. Despite competitive pricing, you can cover the same from all costs.
  • Small businesses can develop their credibility and authority by being VAT registered. Furthermore, they can draw more attention from investors, suppliers and lenders. Businesses that are VAT registered are often seen to have higher turnover. This can eventually play an essential role in the long run.
  • When your business is VAT registered, you must track or record all the income and expenses. This will further play an important role in the long run for the efficient functioning of the business.

What are the responsibilities of businesses that voluntarily register for VAT?

Businesses that voluntarily register for VAT will have a significant number of benefits. However, they must also perform the same duties as those of businesses registered for VAT. Therefore, some of the responsibilities of the businesses that voluntarily register for VAT include the following:

  • Pay the VAT that is due to HMRC.
  • Submit the VAT return on time.
  • Keep a record of the accounts on VAT.
  • Charge the VAT.

Note: Businesses that are charging VAT must charge the correct amount. The failure to do so can lead to extra penalties that will eventually prove to be damaging in the long run.

MTD obligations for voluntary VAT registration

Businesses registered for VAT should also comply with the Making Tax Digital policy. This is an initiative by the HMRC to digitise the process of VAT returns. As per the MTD policy, businesses must maintain their digital records online. They must also use any efficient Making Tax Digital Software to record the data.

The Making Tax Digital policy is not compulsory for all voluntary VAT registered businesses. Nonetheless, the businesses that meet the turnover threshold must comply with the policy rules. There is an exemption for businesses that follow complex models. The current threshold for VAT registration is around £85,000. However, this may be subject to change depending on the situation.

Therefore, businesses that register for MTD will also need to register for VAT. Nonetheless, businesses that voluntarily register for VAT may or may not choose to register for MTD.

Will there be any cons to voluntarily registering for VAT?

While voluntary VAT registration can bring benefits, there will also be some significant disadvantages. One of the main disadvantages will be that the product’s price will appear to be expensive or more for the end-user.

Voluntary VAT registration can bring a wide range of responsibilities to businesses. It can often be difficult for small businesses to manage these. As a result, there will be an extra workload on business administration.


Voluntary VAT registration can be beneficial. Taking the help of an accountant or software will help to streamline the entire process. You must ensure that you comply with all the rules and regulations set by the authority. If you’re a small business, you must use the software. It will help to reduce the burden and ensure that all tasks are performed with complete ease.

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