VAT is a complex tax and continues to cause confusion. Here are six reasons why you might register for VAT:

  1. You Have No Choice. You must register for VAT if your VAT taxable turnover is more than £83,000 (the ‘threshold’) in a 12-month period or you expect to go over the threshold in a single 30-day period.
  2. For Status Reasons. Many register for VAT because they need to create a better impression about their business and that it is larger than it really is. It is difficult to achieve that if you are not VAT registered because it must only mean your business is small.
  3. To Avoid Accidents. It can be tricky in practice to register for VAT at the right time. When you are busy it’s easy to exceed VAT registration turnover threshold by mistake. This can be expensive because HMRC will charge penalties and interest as well as the VAT you haven’t collected and paid to them.
  4. You Are Setting Up in Business and You Have High Setup Costs. For many, setting up in business is expensive and getting a 16% discount is a big deal.
  5. To Increase Your Profits. If you have high expenditure and your customers are VAT registered there is no downside to registering for VAT voluntarily or early, as you will be able to recover the VAT on virtually all your expenditure.
  6. It Forces You To Keep Good Books. Yes, I know record-keeping is a chore for many but like it or not, it is just another part of your business that you need to do well. Disorganised records mean a disorganised business and that can bring disaster.

On the other hand, for some voluntary VAT registration could be a mistake:

  1. You Have Few Expenses. Here the VAT recoverable is probably so small it’s unlikely to be worthwhile.
  2. You Are Very Poor at Bookkeeping. There is no excuse these days because there are so many ways you can get your books completed for you at low cost but many quote this is a reason.
  3. Your Customers Are Not VAT Registered. This means that you are going to have to charge your customers VAT which in turn, means your prices are going to be higher.

Speak to us about your individual position. Getting VAT right or wrong can make a substantial difference to your financial position.

Disclaimer: While every effort has been made to provide, valuable, accurate information in these publications, their content is not intended to replace the advice that a professional would give, taking your particular circumstances into account. This firm, contractors and employees do not accept any responsibility or any form of liability for reliance upon or use of the contents of these articles or blogs.