Registering for VAT will be required if your taxable trading turnover is above £85,000. It is mandatory to register for VAT if you meet the following criteria:
- If you are expecting your taxable turnover to be more than £85,000 in the following 30-day period or
- If you have already achieved a taxable turnover of £85,000 in the last 12 months.
However, you can decide if you need to register voluntarily.
The effective date of VAT registration
The following two examples would help you determine the effective date of registration under the criteria mentioned above.
I am expecting the taxable turnover to be more than £85,000 in the next 30-day period.
On 01 June 2021, you realize that your taxable turnover will be more than £85,000. So, you should register for VAT by the end of 30 June 2021. However, your effective date of Registration will be 01st June 2021, the day you realized that you would go above the £85,000 threshold.
Imagine if you have already achieved a taxable turnover of £85,000 in the last 12 months.
From 01 of July 2020 to 30 of June 2021, you have achieved a taxable turnover of £85,000 or above. You must register for VAT by 31 July 2021, and your effective date of registration will be 01 August 2021.
VAT for businesses Outside of the UK
You should register for VAT if you are supplying any goods or services to the UK. There is no associated turnover threshold for this. VAT registration is compulsory when you start giving to the UK or expect to deliver within the next 30-day period.
If you register for VAT late, you will be required to pay what you owe from the actual date of registration as per the VAT Certificate. HMRC may impose penalties upon what you owe and how late the Registration is.
You will be able to apply for an exception if you exceed the VAT threshold temporarily. However, it would help to write to HMRC on BT VAT, HM Revenue and Customs, BX9 1WR, United Kingdom. Here, you can provide evidence on why you have temporarily exceeded the VAT threshold and will not exceed the registration threshold again in the next 12 months.
HMRC will notify their consideration if you get an exception. If not, you will be asked to register for VAT.
Supplying or Moving goods within Northern Ireland and the EU
HMRC will contact you if you have been identified as trading under Northern Ireland. Further, you will get an XI VAT number. If HMRC has not reached you, it is your responsibility to inform them if one of the following applies to your business:
- If your goods remain in Northern Ireland at the time of sale
- If you receive goods in Northern Ireland from a VAT registered business in the EU
- If you sell or move goods from Northern Ireland to the EU
VAT registrations in EU Countries
Digital service supply
If your consumers are from EU countries, and you are supplying digital services, you must register for either:
- VAT MOSS in any EU country or
- VAT in each country that your consumers reside
If you supply the first service on 02 June 2021, you must register by 10 July 2021. (VAT MOSS scheme)
If you have opted out from the VAT MOSS scheme, you need to register in each country that your consumers are based.
Types of VAT Schemes
In the UK, you have VAT schemes that you can register your business:
1. Flat Rate VAT Scheme
Advantages of the flat rate VAT scheme:
- Pay a fixed rate to HMRC as VAT
- Keep the difference between what you charge from the Customer and what you pay to HMRC
- No VAT reclaims are allowed. However, you can reclaim VAT on the capital asset purchased above £2,000.
You can apply for a Flat rate VAT scheme if your annual taxable turnover is £150,000 or less (excluding VAT).
2. VAT Cash Accounting Scheme
If you choose Cash Accounting Scheme, you can;
- Pay VAT on sales when the customers pay you rather than when the invoice is raised
- Reclaim VAT on when you settled the bill to the supplier
You can apply for this Scheme if your taxable turnover is less than £1.35 million.
3. VAT Annual Accounting Scheme
If you choose Scheme, you can;
- Make advance payments to VAT based on your previous VAT due
- Submit VAT return for one year
However, with the introduction of VAT Making Tax Digital, most businesses were required to submit quarterly VAT returns.
You can apply to this Scheme if your estimated taxable turnover is less than £1.35million.
How to Register for VAT
Most businesses opt to register for VAT online. You can register for VAT by creating a Government Gateway account (VAT online Account). You can use this account to submit VAT returns and pay your VAT liability.
There are certain instances where you cannot register for VAT online. You need to register for VAT by post using VAT1 if;
- You need to join the Agricultural flat rate scheme
- You need to apply for any VAT exception
- You need to obtain separate VAT numbers for divisions or business units under the same entity
You will receive the VAT certificate via post, or it will be available to download through your Government Gateway account within 30 working days. However, this process could take longer than 30 days.
Changes to your VAT registration details
It would help if you informed HMRC about any changes to your business details within 30 days. You can change your VAT registration details;
- Online – Via Government Gateway Accounts
- Via post – Form VAT484
- Via Webchat or Phone
Cancel the VAT registration
You need to ask HMRC to cancel your VAT registration if;
- You have stopped trading or making taxable supplies
- your taxable turnover is less than the deregistration threshold of £83,000
- You join a VAT group
You will be able to cancel your VAT registration via your Government Gateway account, or you can send the completed VAT7 form to HMRC via post.
You must submit your Final VAT return after you cancel your VAT registration and pay any VAT due as of the registration date.