Q&A: VAT registration

Your business may be required to register for VAT if it meets certain criteria. It can also be beneficial for some businesses to register for VAT even if they are not required to. Kate Fisher of CJ Fisher & Co explains the circumstances under which your business should be VAT registered

When does a business need to be VAT registered?

A business must register to pay VAT when the value of its taxable supplies exceeds the registration threshold (£81,000 per annum in 2014/15).

If my turnover is below the threshold, might it still be wise to be VAT registered?

Yes, if you make all or the overwhelming majority of your sales to VAT-registered businesses, because you will be able to reclaim VAT on any business expenses you incur. ‘Voluntary registration’ is the term given to becoming VAT registered even though your turnover is below the registration threshold.

What does the registration process involve?

You will need to complete a VAT application form, which is available from HM Revenue & Customs (HMRC). This can be completed online or you can fill out a paper copy and send it back to HMRC. There is no charge for completing the form. Once registered, you will then have to complete quarterly VAT returns online - regardless of how you originally registered.

When do I need to register?

You need to register if at the end of any month, the value of your taxable supplies in the previous 12 months or less exceeds the registration threshold, or if at any time you expect the value of your taxable supplies in the next 30 days alone to exceed the registration threshold.

Currently, my turnover is too low, but if it looks like I'll exceed the threshold next year...

As I’ve said, it can be beneficial if you make all or most of your sales to VAT-registered businesses, because you can reclaim VAT on any business expenses you incur.

If I’ve only just gone over the threshold, but I won't exceed it next year, can I argue my case with HMRC?

If you can provide evidence and explain why the value of your taxable supplies will not go over the de-registration threshold (£79,000 in 2014/15) in the next 12 months, you may not have to register. However, you still have to inform HMRC National Registration Service that you have reached the limit.

Can I reclaim VAT on business purchases before I registered?

Subject to certain conditions, you can reclaim any VAT you incurred before you registered. This would include VAT on goods you bought for your business within the past three years and which you have not yet sold; and VAT on any services you received not more than six months before your date of registration

I'm thinking of splitting my business up so that I don't exceed the VAT threshold...

You cannot do this. HMRC will not allow you to artificially separate your business to avoid registering for VAT.

If some of my sales are made overseas, must I register for VAT in the UK?

All sales are included to calculate whether you have reached the registration threshold, whether these are made in the UK or not.

You can find more detailed VAT information and a range of VAT tools on Tax Donut.