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
A business must register to pay VAT when the value of its taxable supplies exceeds the registration threshold (£83,000 per annum in 2016/17).
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.
You will need to complete a VAT application form, which is available from HM Revenue & Customs (HMRC). This should be completed online, unless you meet one of the very limited exemptions. 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.
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.
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 you can provide evidence and explain why the value of your taxable supplies will not go over the de-registration threshold (£81,000 in 2016/17) 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.
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.
You cannot do this. HMRC will not allow you to artificially separate your business to avoid registering for VAT.
All sales are included to calculate whether you have reached the registration threshold, whether these are made in the UK or not.
Written with expert input from Kate Fisher of CJ Fisher & Co.