Understanding VAT registration

Understanding the VAT registrations threshold

If you have a business that has a VAT taxable turnover of more than £85,000 it is imperative that you register for VAT with HM Revenue and Customs, to speak to them regarding this you can phone the number.

Once you have registered, you’ll receive a VAT registration certificate, which will provide you details on your VAT number, when you’ll need to submit your first VAT return and payment, as well as information on the ‘effective date of registration’, which is the date of which you went over the threshold or the date of your voluntary registration.

Sole Trader VAT Registration Threshold

The Sole Trader VAT Registration Threshold currently sits at £85,000. If your business turnover reaches this amount in any 12 month period, or you expect that it will, you will have to register for VAT for your business. Currently, the standard VAT rate is 20%.

Voluntary VAT Registration

It is possible to register for VAT voluntarily if you have a turnover that is less than £85,000. However, you can’t voluntarily register if the things that you sell are exempt.

You will have set responsibilities if you do register for VAT.

VAT registered businesses

If you are a VAT-registered business, there are certain things that you must do. These include charging VAT on your goods or services. You are also able to claim back any VAT that you have paid for business-related goods or services.

Every three months you will need to fill in a VAT return which informs the HMRC how much VAT you’ve charged, as well as the amount that you have paid.

In certain circumstances, you might have charged more VAT that you paid, and in these cases, you will have to pay the difference to the HMRC.

If you have paid more VAT that you have charged, you will be able to reclaim the difference from the HMRC and get the money owed to you back.

How to register

You can register for VAT in a number of ways, you can do it online yourself, you can use an accountant to help deal with this side of your business, and you can also register by post using VAT1 form, this is typically done when you can’t register online.

How to register for VAT

When to register

It is imperative that you register for VAT when you go over the £85,000 taxable turnover threshold, or know that you will.

The threshold is based on your VAT taxable turnover, which is the total of everything sold that isn’t VAT exempt.

When it comes to businesses that are outside of the UK, you must register for VAT as soon as you supply goods or services to the UK, and there is no threshold for this. This must be done as soon as possible, or if you expect you will in the next 30 days.

If you register late for VAT, which means 30 days after your business turnover exceeding the £85,000, then you will have to pay what is owed to the HMRC when it should have been registered. There is also a chance that you could receive a penalty on top what is owed to the HMRC.

VAT Thresholds

There are certain thresholds that must be met when it comes to registering for VAT, for sole traders that is more than £85,000 in any 12 month period. Registration for distance selling into the UK is more than £70,000. For those looking to bring goods into the UK from the EU, the registration threshold is more than £85,000. The deregistration threshold is less than £83,000.

The VAT thresholds have changed throughout the years, and if you think that you should have been registered in previous tax years, you must check out these thresholds on the gov.uk website to ensure that there is no outstanding VAT that you need to pay to the HMRC.

VAT Registration Check

If you need to check the details of your VAT Registration you will need to get in touch with the HMRC, you can phone the number 0843 178 4298 to find out the details you’ll need.

It is imperative that your VAT registration details are kept up-to-date, and if anything does change you will need to ensure that they are done. You can make changes to your details by getting in touch with the HMRC on the number above, you can also make changes online through your VAT online account, or do it through the post using a VAT484 form.

There are certain changes that you can make that could result in your having to cancel your VAT registration.

Log in to your VAT account

Cancel VAT Registration

If you are no longer eligible to VAT registered, or you fall below the de-registration threshold of £83,000 you must get in contact with the HMRC to cancel your registration.

If you stop trading or making VAT taxable supplies, or you join a VAT group, you must cancel your VAT registration within 30 days. If you do not do this, you could be charged a penalty.

To cancel your VAT Registration you can either do this online by logging into your VAT account, or you can fill out the VAT7 form to deregister for VAT by post.

Cancelling your VAT registration typically takes around three weeks for the HMRC to confirm, after this, they will provide you with your official de-registration date.

Once you have been given this date, you must stop charging VAT, you will also need to keep your VAT records for six years.

If the HMRC realise that you shouldn’t have been cancelled, they will automatically re-register you. You will also have to pay back any VAT that should have been accounted for during this time too.

When you have cancelled your VAT Registration, you will have to submit a final VAT return.

VAT exceptions

There can be certain exceptions when it comes to registering for VAT, such as if your taxable turnover only goes over the threshold temporarily. You must get in touch with the HMRC with evidence, this must explain and show why your turnover won’t go over the de-registration threshold of £83,000 in the next 12 months. It is then left to the HMRC to make a decision about your exception and will let you know whether or not you have gotten one. If they don’t think you should have one, you will have to register for VAT.

Transferring your VAT registration

It is possible to transfer a VAT registration from one business to another. This might happen if you take over a business and want to continue using its current VAT number.

To apply for a transfer of a VAT registration you can use the VAT68 form and send it through the post, or apply online in the VAT online account.

It typically takes around three weeks for the HMRC to confirm a transfer of VAT.