Starting up:
Should I be registered for VAT?
The supply of any goods and services, which are subject to VAT at any rate, including the zero rate, are called taxable supplies. They are called taxable supplies whether you are registered for VAT or not.
If the value of your taxable supplies is over a specified limit, you must register for VAT, unless your taxable supplies are wholly or mainly zero-rated in which case you may apply for exemption from registration.
You can voluntarily register for VAT even if your taxable turnover does not exceed the prescribed limits, provided you have a bona fide business. You may find this advantageous to your business, for example:
- if you do not have a VAT number it follows that your business must be small, and you may want to conceal this;
- you can recover the input VAT on your purchases only if you are registered for VAT;
- if you register when you set up then you do not have to monitor your turnover each month to check whether you have exceeded the registration threshold.
It is the person, not the business, who is registered for VAT. The person to be registered could, for example, be a sole proprietor, a partnership or a limited company. Each registration covers all the business activities of the registered person and consequently if, for example, you are a sole trader with two different businesses, then they will both be covered by the same VAT registration.
A person must register for VAT where they:
- supplied taxable goods and services amounting to more than the registration threshold (£61,000 for 2006/07) in the last 12 month period, or
- anticipate supplying taxable goods and services amounting to more that the registration threshold (£61,000 for 2006/07) in the next 30 day period alone.
In the first case, notification must be within thirty days of the end of the relevant 12 months. In the latter case, notification must be within thirty days of the date on which you first had reason to anticipate the increased turnover.
It is important to monitor turnover because there is a penalty for late registration. This is in addition to the tax payable.
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Where next?
Within VAT…
- What is VAT?
- Should I register for a VAT accounting scheme?
- VAT records
- Tax point
- Completing your first VAT return
- Can I reclaim all the VAT on my motor expenses?
Within Starting up ...
- Developing your business idea
- Your business structure
- Setting up
- Accounting systems
- Payroll and PAYE
- National Insurance contributions
- Income tax
- Corporation tax
- Contact us about this issue
- Read about how we can help you & your family
- Request a meeting with us
