VAT and the rules regarding registration may seem a little confusing but they don’t need to be. Read on as we look at what the small business needs to do about registering for VAT. 

When should you register?

If your VAT taxable turnover (the total of all your sales that are not exempt from VAT) is above the threshold of £85,000, or you believe it will go above that amount, you must register for VAT. 

However, it is compulsory to register for VAT if:

  • You believe that your VAT taxable turnover will exceed £85,000 in the next period of 30-days – this should be done by the end of that period. The effective date of your registration is not the day you went over the threshold but the day you realised it would.
  • In the last 12 months your business had a VAT taxable turnover of over £85,000 – If by the end of any month your VAT taxable turnover for the last 12 months exceeds this amount then you much register within 30 days of the end of the month in which you exceeded the threshold. Your date of registration will be the first day of the second month after you exceeded the threshold.

Goods and Services Based VAT Registration

Depending on the goods and services you offer, and where they are sold, you may also need to register.

Examples of this could include:

  • If the goods or services that you sell are exempt from VAT and you are based in Northern Ireland – you would need to register only if the goods are VAT exempt or “out of scope” but the goods that you purchase to use in your own business cost more than £85,000 and come from VAT-registered suppliers in the EU
  • If you take over a business that is VAT-registered – in this instance, you may be required to register for VAT purposes.

For those businesses that are outside the UK there is no threshold provided that neither the business or you are based in the UK. However, if you supply any services or goods to the UK you must register as soon as you do so (or if you believe you will in the next 30 days).

What happens if you register late?

In the event of a late registration then you will be required to pay from the date you should have been registered. Depending on how late your registration is and how much you owe, you may be subject to a fine.

What about voluntary registration?

If your business has a turnover below £85,000 you can voluntarily register. You will be required to pay HMRC any VAT amounts that you owe from the date your registration is confirmed.

Can I get an exception?

If your taxable turnover rises above the threshold on a temporary basis you can apply for an “exception” to your registration. If you want to do this you will need to write to HMRC, sending them evidence that indicates your reason for believing that your VAT taxable turnover will not be over the threshold in the next 12 months. They will consider your request and respond in writing confirming if it has been granted. If it isn’t granted, they will register you for VAT.