VAT registration – What is VAT registration?
VAT registration is the process of listing your business with the government as active in production and sales.
After a business registers for VAT, it's able to reclaim any VAT paid on company purchases and becomes responsible for:
Charging VAT on any goods or services sold (and charging the right amount!)
Paying any VAT due to HMRC
Submitting VAT Returns
Keeping VAT records and a VAT account
Companies registered for VAT will be issued a unique VAT registration number (VRN). This number should be included on all of your business’ sales invoices.
In the UK, companies with a turnover of more than £85,000 are required to register for VAT. Your taxable turnover is the total value of all taxable sales you make throughout the tax year. Sales that are exempt from VAT don’t count towards your taxable turnover.
Most businesses can register for VAT online. It's also possible to register for VAT through an accountant or by post.
Many small businesses and start-ups have a turnover under the £85,000 VAT registration threshold but still choose to register for VAT. There are pros and cons of voluntary VAT registration, and the decision to opt-in voluntarily very much comes down to your particular business, as well as your own personal preferences.
The advantages of voluntary VAT registration for entrepreneurs and small businesses include:
You can reclaim some of the VAT on the goods and services purchased by your business.
As your business grows, you may reach a turnover of £85,000. If you preemptively register for VAT before reaching this threshold, you could save the time and hassle of adjusting your prices to include VAT rates.
Some of the disadvantages of voluntary VAT registration for entrepreneurs and small businesses might be:
When you start charging VAT, it’s common practice to include the tax in your prices. Your products or services will therefore appear more expensive for the end-user.
Once you’re registered for VAT, you’ll need to file VAT Returns, keep VAT invoices and receipts, and maintain VAT accounting records.