If you’re just starting your business, there are lots of things to think about and processes to go through. One of these may be registering for VAT. In this article, we’ll explain when you might want to register for VAT and how to go through this process.
When do you need to register for VAT?
Your business must register for VAT if its taxable turnover for any consecutive twelve months exceeds the VAT registration threshold, which is currently £85,000. If you think you'll reach that threshold within 30 days, you'll also need to register. Plus, you'll need to register for VAT if you take over an existing business that is already VAT-registered.
However, you can also register for VAT voluntarily if none of the above applies. If your customers are mainly other VAT-registered businesses, it will make no difference to them if you are VAT registered. (However, if your business is B2C, you may want to think twice about charging customers for VAT if you don't need to.) Plus, you'll often be in a refund position with HMRC, making your business better off.
Instances where you won't be able to register for VAT are if you don't meet HMRC's definition of a business for VAT purposes, or if you only sell goods or services exempt from VAT.
How much does it cost to register for VAT?
It doesn’t cost anything to register for VAT, but if you don’t want another thing on your to-do list, we can do it for you with our VAT registration package.
What do you need in order to get started?
Before you sit down to fill in the form, you will need:
- Your National Insurance (NI) number or tax identifier
- Certificate of incorporation/incorporation details
- Details of all associated businesses within the last two years
- Your business bank account details
- Details of the business that has been acquired, if relevant
How can you register for VAT?
You can register for VAT either online or by filling in a paper form. However, bear in mind that even if you choose a paper form, you’ll still need to submit your VAT returns and payments electronically in the future because HMRC is paperless.
You can register for VAT on the HMRC website. You will need to have registered for HMRC Online Services or have a Government Gateway account.
You can download a paper form (a VAT1 form) if:
- you need to apply for a “registration exception”
- you're joining the Agricultural Flat Rate Scheme
- you're registering several divisions or business units under different VAT numbers
The nominated partner of a self-employed partnership, or a business group using one VAT number, can also now use HMRC's online system.
Once you’ve registered, you’ll receive your certificate of registration, or VAT4.
What do you need to do next?
Once you’ve got your VAT4, you’ll need to register for VAT Online Services. To do this, you’ll need to provide the following information:
- Your VAT registration number (found on your VAT4)
- The postcode of your principal place of business (found on your VAT4, or if you're an overseas business, use AB10 1ZP)
- Your effective date of registration for VAT (found on your VAT4)
- The final month of the last VAT return you submitted
- The “Box 5” figure from the last VAT return you submitted
Of course, the final month of the last VAT return you submitted won’t apply, so just select N/A for this and enter 0.00 for the “Box 5” figure.
Can you claim VAT retrospectively?
You may be able to claim VAT on some purchases you made before registering. You can reclaim VAT on goods you bought or imported up to four years before you registered, providing the following apply:
- They were bought by you as the entity that is now registered for VAT
- They were bought for business purposes (if the goods are used in part of the business that is exempt for VAT purposes, the VAT cannot be reclaimed)
- They are still held by you or they have been used to make other goods you still hold
It’s a good idea to do a stock-take to establish the level of stock you have upon registering for VAT.
In terms of services, you can claim VAT on services bought during the six months before you registered for VAT, as long as the first two bullet points above apply. For example, as a new business you may have spent money on accountancy or legal advice, which you could claim back if the above conditions are met. For both goods and services, you’ll need the VAT invoices, and the VAT will be based on the amount on those invoices, rather than the current VAT rate.
How can Paramount Company Formations help?
The easiest way to register for VAT is to ask us to do it for you. We can deal with HMRC on your behalf and ensure every box is checked correctly, giving you one less thing to worry about. Take a look at our VAT registration package for more information.