VAT Registration - Why Should I Register for VAT
What is Vat Registration Number?
Businesses must register for VAT (Value Added Tax) with HMRC, if the VAT taxable income is greater than £85,000. The business receives a VAT registration certificate when they register the business with HMRC. The certificate confirms the VAT number, details for submission on first VAT return and payment, and effective date of registration. The effective date is when the business crossed the threshold and felt that they need to register for VAT. Business can register voluntarily for VAT Registration number, if the turnover is less that £85,000, except the lot being sold is exempt. The Business VAT registration certificate can be received within 30 working days, nevertheless it can take longer. The certificate is sent either to the VAT online account or by post if it's not an online registration or through a third party.
Necessary registration – Why Should I Register For Vat?
Business needs to register for Value added tax if:
- Taxable VAT turnover is greater than £85,000 in a 12 month period
- Goods are received in the United Kingdom from the European Union and the value is more than £85,000
- The business anticipates that it will cross the threshold in a straight 30 day timeline
There is no threshold for businesses based outside the United Kingdom. But the business must immediately register for VAT if they have supplied any goods or services in the United Kingdom or anticipate doing so within the next 30 days. It may also be required to register for VAT if a business has been taken over.
Delayed Business VAT Registration
If a business does not register for VAT within time, it is liable to pay a penalty depending on how much the business owes and the duration of late registration. As stated earlier, it is imperative for the business to register for VAT within 30 days of the business turnover crossing the threshold.
If the taxable turnover of the business goes over the threshold provisionally, the business can apply for a registration exception. A written application needs to be sent to the HMRC with facts showing why the threshold will not be crossed in the next 12 months. If the HMRC is convinced with the written application, they will send a written confirmation else, the business will need to register for Value added tax.
VAT responsibilities for a business
From the effective date of VAT registration business must:
- Charge the correct VAT amount on the invoice
- Timely file VAT Returns
- Regularly clear all VAT dues to HMRC
- Maintain VAT records
Until a business has a VAT number, it cannot charge or illustrate VAT on the invoices. However, the business is liable to pay the Value added tax for this period to HMRC. In such a scenario, the prices of the goods and services will increase and the customers should be informed about the same. Once the VAT number is obtained, the business can re-issue the invoice to the customer reflecting the VAT amount separately.
HMRC VAT Registration Process
Almost all businesses can register for VAT online. Even partnerships and group of companies can register under one VAT number. Once the business is registered online and has VAT online account, it will need to submit VAT returns to HMRC as and when they are due. Businesses can even appoint accountants like DNS Accountants or agents to help them submit the VAT returns on time, meeting all deadlines, and interact with HMRC on the behalf of the business. In-case the business cannot register online, it can register by post if
- The business wants to apply for a 'registration exception'
- It is an European Union business selling in the United Kingdom
- The business is becoming a part of the Agricultural flat rate scheme
- A business unit or division is to registered under a different VAT number
- The business is disposing assets for which 8th or 13th Directive refunds will be claimed
As an industry, farming receives a lot of VAT refunds. The industry's direct purchases are more often than not zero-rated and so are their sales. However, any VAT the industry incurs on extra expenses such as equipments or overheads can be claimed as refunds. Other businesses that may want to register for VAT voluntarily can include a child shoe shop or green grocers. Yet again, sales and direct purchases of these stores are generally zero-rated, however, if any expenses, legal fees or equipment, they ought to recover any VAT charged on these purchases.
VAT Threshold Computation – Calculating VAT Threshold
The VAT taxable turnover is the full value of goods and services sold that aren't exempt for VAT. The UK VAT threshold for registration for the year 2020/21 is £85,000. It is required to register with HMRC for VAT in a 12 month rolling period.
To calculate if you've exceeded the threshold in any 12-month period, you need to add together the total value of sales of your products or services that aren't VAT exempt, this will include the following:
- Goods that are hired by you or loaned to customers
- Company merchandise used for personal reasons
- Goods exchanged, or given as gifts
- Services received from businesses in countries that had to 'reverse charge'
- Building work over £100,000 your business did for itself
Comprise any zero-rated substances – only dismiss VAT-exempt sales, and goods or services you deliver outside the UK
VAT Registration Check – How long it takes to get a VAT registration number?
Usually, the HMRC takes a month to process the VAT applications, but it can take longer if the HMRC needs to carry out further checks. The government of United Kingdom claims that it can even take as less as 14 working days to process the claim. HMRC intends to process 70% of the applications within 10 business days and most are processed within 30 days. From the time of applying for VAT registration and getting the VAT registration number, the business must keep account of and pay all VAT dues. The business becomes liable to keep records of all the invoices from the time it voluntarily register for VAT. It actually does not matter when the business applied for registration or the date the VAT registration number was received. Business can reclaim any VAT paid on the purchases from the date of registration. To do so, records of all inwards invoice from the suppliers needs to be maintained.
VAT Registration Form
The VAT registration form can be accessed by clicking here.
Different VAT Rates
Different items have different implications.
|Standard||20%||The standard value added tax rate is the default tax rate. This rate is charged on almost all goods and services in the United Kingdom, if not acknowledged as being zero-rated or reduced.|
|Reduced||5%||Items that fall under this category are children’s care seat, installation of energy-saving materials, sanitary hygiene products, and domestic fuel and power, etc.|
|Zero||0%||Items that fall under this category are public transport, books and newspapers, food (not restaurant meals or takeaways), children’s shoes and clothes etc.|
|Exempt||Not applicable||The law specifies that exempt items are free from VAT charges. Examples include fundraising, providing credit, insurance, education, membership, etc.|
|Outside the scope||Not applicable||No VAT is applicable of items that are totally outside of the United Kingdom’s VAT system|
Business VAT Registration Contact Number
|Line||VAT Registration Contact Number|
|Telephone:||0300 200 3700|
|Outside UK:||+44 2920 501 261|
|Text-phone:||0300 200 3719|
Taxpayers can call the department for any help regarding common VAT enquiry. Taxpayers must have their VAT registration number and postcode with them. Tax cannot be paid over the phone.
Get in touch with Trusted Accounting Partner – DNS ACCOUNTANTS
DNS Accountants is UK-based, trusted accountancy firm with over a decade of experience in accounting and taxation domain. Founded back in year 2005, DNS Accountants has been helping small & medium size businesses & startups with self-assessment, VAT registration Services and other VAT related Query. Professional chartered accountants & bookkeeping experts at DNS Accountants bring rich experience and knowledge to help you save more and efficiently manage all sort of accounting & taxation related requirements for your business. Our professionals are committed to provide superior quality customer service to our valuable clients.
With our VAT services, you get:
- Quality services at affordable rate
- Comprehensive range of accounting and tax planning services for your business
- Free consultation on VAT registration and taxation advice
If you're interested and want to proceed, or want to know more about our offerings, you can book a free consultation with one of our accounting experts & tax advisors.