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How to become VAT registered

How to become VAT registered
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    Finding out how to become VAT registered is an important step for your business if you fall into a category where you’re legally required to do so.

    The easiest way is to sign up for a VAT online account. You can either do this yourself or appoint an accountant or agent to sign up on your behalf.

    At WIS Accountancy, we’ve compiled a simple guide to help put you on the right track.

    Which businesses need to be VAT registered?

    You must register for VAT if the total VAT taxable turnover of your business for the past 12 months was more than the threshold of £85,000 or if you estimate your turnover will exceed £85,000 in the next 30 days.

    There are certain circumstances under which you must register, regardless of your VAT taxable turnover.

    If your business is based outside the UK, or if you as an individual are based outside the UK and supply goods or services to the UK – or expect to do so within the next 30 days – you must become VAT registered.

    How do you become VAT registered?

    You can register for VAT online in the vast majority of cases via the government’s website. You will need to create an online account. This is also called a “Government Gateway” account.

    This is necessary to manage your VAT accounting and submit your VAT Returns to HMRC.

    The process of setting up the account is self-explanatory, with clear step-by-step instructions provided on the site. If you don’t wish to deal with HMRC, you can appoint an agent, such as an accountant, to submit your VAT Returns and act on your behalf.

    Can anyone register online for VAT?

    There are occasions when you can’t register online. You must register by post, using a VAT1 form, if you wish to register multiple divisions of a corporate body under separate VAT numbers.

    You should also post a VAT1 form if you’re joining the Agricultural Flat Rate Scheme and if you wish to apply for a “registration exception”.

    You should register by post, using the VAT1A form, if you are an EU business “distance selling” to Northern Ireland. If you import goods valued at more than £85,000 into Northern Ireland from an EU country, you should register by post using the form VAT1B.

    Complete and post form VAT1C when you dispose of assets for which you have claimed Directive refunds. All of the forms can be downloaded from the government’s website and printed.

    What happens after you register for VAT?

    Once you have registered, you’ll receive a nine-digit VAT number. This is your own unique number. From this point onwards, you must include it on all invoices that you raise.

    You will also be sent information on when your first VAT return and payment should be submitted. You will receive confirmation of your registration date, called your “effective date of registration”.

    Depending on how you registered, this information will be sent to you in your online VAT account or through the post.

    When do you start charging and reclaiming VAT?

    You can reclaim VAT on items you buy and start charging VAT on your sales from your effective date of registration. If you’re still waiting for your VAT number to arrive, you can’t include VAT on your invoices. However, you can increase your prices to allow for the VAT you will have to pay to HMRC.

    For example, if your effective date of registration is 1st May, you will need to pay VAT to HMRC on every invoice you raise from that date onwards.

    Imagine you’ve arranged a £100,000 contract on 1st May to provide services to a new client. You have registered for VAT because you know you’ll go over the VAT threshold within the next 30 days.

    You should tell your customer that you will be adding 20% to the original contract to account for the VAT, so you will need to raise an invoice for £120,000 rather than £100,000.

    Once you’ve received your VAT number from HMRC, re-issue the invoice for the full amount, including £20,000 VAT. Your customer can reclaim the extra £20,000 from HMRC on their next VAT return.

    Do you need help with VAT registration?

    As a full-service accountancy firm, we know how important it is to register for VAT. Founded in 2009, we offer personalised accountancy services for businesses of all sizes to help take the strain off company owners.

    We are a family of businesses, so can provide tax advisory services and assist businesses with R&D tax credits, as well as other services, such as Xero accounting, Seed Enterprise Investment Scheme (SEIS), business insurance (WIS Business Protection) and mortgages (WIS Mortgages).

    Call us on 0203 011 1898 or fill out the contact form. We will respond to all queries quickly.

    FAQs

    How much does it cost to become VAT registered?

    A. There is no charge for VAT registration. The process of registering for VAT on the HMRC website is free. However, when you come to file your VAT return, there are optional ways of doing so that can impact your costs. If you’re unsure how to proceed, ask a professional accountant.

    Can I be VAT registered as a sole trader?

    A. You must register for VAT if your turnover is more than £85,000. If it suits your particular business, you can register voluntarily. For example, if you sell to other VAT-registered businesses and wish to reclaim the VAT, you will need to register.

    Do you lose money being registered for VAT?

    A. For most businesses, being VAT registered makes no net difference to your business, your profitability, or how much you earn. When you charge VAT, you’re simply collecting it temporarily from your customers and handing it over to HMRC.

    Are there disadvantages to being VAT registered?

    A. If some of your suppliers are not VAT registered, you will be unable to claim back the VAT on purchases from them. If you regularly generate more VAT than you can reclaim, you may be left with a large VAT bill.

    Do you pay VAT on the first £85,000?

    A. If your turnover is less than £85,000 you can choose to register for VAT. This is known as voluntary registration. Once you’re registered with HMRC, you must pay any VAT you owe from the date you are first registered. You don’t have to register for VAT if everything you sell is exempt from VAT.

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