Being VAT-registered can lead to cost savings, competitive advantages and access to financial schemes offered by the government. But what is required to register for VAT? This article discusses the benefits of being VAT-registered and what is needed to do so.
What is VAT?
VAT (Value Added Tax) is a consumption tax collected on the value added to goods and services. VAT is typically collected at multiple points in the supply chain, and businesses are responsible for collecting the tax from their customers and remitting it to HMRC.
What does being VAT-registered mean?
In the UK, VAT registration is a legal requirement for businesses whose taxable turnover exceeds £85,000. Being VAT registered means a business is registered with HMRC to collect and remit VAT on selling goods and services. This means a company has the legal authority to charge VAT on the products or services it sells, and it is also entitled to reclaim the VAT it has paid on its business-related expenses.
Why register for VAT?
Several benefits are associated with being VAT-registered, even for businesses not required to register. Here are some of the key benefits of being VAT-registered in the UK:
- You can reclaim VAT: When your business is VAT-registered, you can claim back the VAT you have been charged for products and services related to your business.
- VAT scheme eligibility: Depending on your business's circumstances, you may be eligible for VAT schemes when you are VAT registered.
- Competitive advantage: Being VAT registered can make your prices more competitive, as non-registered businesses must pass on the total VAT cost to their customers.
- It simplifies global trade: If your business is involved in international trade, VAT registration can streamline transactions with other VAT-registered businesses in the EU and worldwide.
- VAT-only invoices: VAT-registered businesses can issue VAT-only invoices, making it easier to do business with other VAT-registered entities.
What is required to register for VAT?
In the UK, VAT registration is required for businesses that meet specific criteria. Your business must register for VAT if your taxable turnover exceeds the current VAT registration threshold of £85,000.
Here are some things you need to be aware of before registering for VAT:
- VAT returns: You must submit regular VAT returns to HMRC. This involves reporting the VAT you've charged on your sales and the VAT you've paid on your expenses.
- VAT Records: You must keep VAT records for at least six years.
- Penalties: You can incur fines if you fail to register for VAT when required or submit VAT returns on time.
- De-registration: You must cancel your registration if you're no longer eligible for VAT registration.
Registering for VAT doesn’t need to be complicated or stressful. With over 35 years of experience helping UK businesses register for VAT, we can complete the process on your behalf.
Find out more about our VAT registration service here.