PART 2: REGISTERING FOR VAT

Updated: Mar 22



WHO NEEDS TO REGISTER FOR VAT?

Some businesses have to register for VAT, some aren’t allowed to, and others can choose.

  • Who must register for VAT: Businesses with an annual taxable turnover of more than £85,000. You may be fined if you don’t register.

  • Who is not allowed to register for VAT: Businesses that sell only VAT-exempt goods and services.

  • Who can choose to register for VAT: Businesses with an annual taxable turnover of less than £85,000.

BENEFITS OF REGISTERING FOR VAT?

Once you’re VAT registered, you don’t end up paying VAT on business expenses. You’ll still get charged the VAT-inclusive price when you make the purchase, but you can claim that money back when you file your return with HMRC.

WHAT DO I NEED TO REGISTER?

To register, you need:

  • A National Insurance (NI) number or your tax identifier (Unique Taxpayer Reference – UTR)

  • Details of other businesses you’ve owned within the past two years

  • Your business bank account details

If you bought the business, you’ll need to supply records of the sale.

HOW TO REGISTER FOR VAT?

It’s easy to register for VAT on your own and it costs nothing. Your best bet is to do it online through the HMRC website.

CHOOSING A VAT ACCOUNTING SCHEME…

Now you know the basics of how to register for VAT. But during the process, you’ll be asked to identify what VAT accounting scheme you’ll use. The accounting scheme is how HMRC calculates whether you owe VAT, or get a refund.


  • Most businesses must use standard VAT accounting: You record the VAT collected on each sale and the VAT paid on each purchase, then submit a VAT return to HMRC every quarter.

  • You may be able to use annual VAT accounting: Some businesses can submit a VAT return once a year, however, they are still expected to pay quarterly. Those quarterly payments are based on your last return or an estimate.

  • You may be able to join a flat-rate scheme: Certain smaller businesses can skip all the VAT accounting and simply pay a percentage of their turnover as VAT. An accountant or bookkeeper can help you decide if this makes sense for your business.

  • You may be able to use a cash accounting scheme: Under cash basis accounting, you’re assumed to have collected or paid VAT when money changes hands. Under all the other schemes, you’re assumed to have collected or paid VAT as soon as an invoice is raised.

ONCE YOU’RE REGISTERED FOR VAT…

After VAT registration you need to:

  • add VAT to your prices

  • issue VAT invoices to your customers

  • file VAT returns and pays any VAT due to HMRC

  • keep digital VAT records and a VAT account


WHY DO I NEED TO KEEP DIGITAL RECORDS?

If you’ve signed up for Making Tax Digital for VAT (which all VAT registered businesses need to do by April 2022), the records you must keep are the same as any VAT-registered business. The difference is that you’ll need to keep some of them digitally.


It’s important that you comply with Making Tax Digital. HMRC can visit your business to inspect your record-keeping and charge you a penalty if your records are not in order.


HOW DO I KEEP DIGITAL RECORDS?

VAT-registered businesses must:

  • keep records of sales and purchases

  • keep a separate summary of VAT (called a VAT account)

  • issue correct VAT invoices

The records must be:

  • kept for at least 6 years (or 10 years if you used the VAT MOSS service)

  • accurate, complete, and readable

VAT LOAN FUNDING:

Spreading the costs of your VAT costs is a viable option if your business is, for whatever reason, unable to keep up with the quarterly VAT deadlines. It may be that you simply would prefer to spread the payments over a longer period. Vat loan funding is also becoming a popular choice for companies who are wanting to improve their cash flow both in the short and long term.


If you would like more information or would like to begin an application towards securing your loan for your business, then please do not hesitate to get in contact with one of our finance brokers on 01908 429888 or via info@approved-finance.co.uk



 

Reference:


Xero. 2022. How to Register for VAT | VAT Guide | Xero. [online] Available at: <https://www.xero.com/uk/guides/vat/registering-for-vat/> [Accessed 25 January 2022].


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