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VAT
3. Should You Register?
The advantage of registering is that a business can reclaim VAT paid on business purchases. But if a business mainly deals with members of the public and it begins adding 20 per cent VAT to its prices, it may lose customers.
3.1 A business must notify HMRC within 30 days of the end of the month in which VATable sales in the last 12 months exceeded £73,000.
- Exceptionally, if a business expects sales to fall back below this level, it can ask HMRC to allow it to remain unregistered.
- A business must also register if sales during the next 30 days alone are expected to exceed £73,000 - eg if a new company is set up with orders already in place totalling £73,000.
- Penalties for late notification can be as much as 15 per cent of the VAT due in the first return, and you still have to pay HMRC the VAT you should have been charging customers.
3.2 A business can opt to register for VAT if sales are below the registration threshold in order to reclaim VAT paid on business purchases. It may be worth registering if:
- Your sales are zero-rated.
- Customers are themselves VAT-registered.
- You intend to set up a business making VATable supplies. This will allow you to reclaim VAT on your pre-trading expenses. You will need to provide evidence of an intention to make VATable supplies.
Labels: Tax
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