Should I be registered for VAT?
There are some special schemes that are available to smaller businesses, which could simplify your VAT accounting.
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, providing you have a bona fide business, and 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 practitioner 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 (£58,000 for 2004/05) in the last 12 month period, or
- anticipate supplying taxable goods and services amounting to more that the registration threshold (£58,000 for 2004/05) in the next 30 day period alone.
In the first case, notification must be within thirty days of the end of the relevant 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.
Where next?
Within 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 Your partnership
- Setting up
- Accounting systems
- Payroll and PAYE
- National Insurance Contributions
- Income tax
- Exiting a partnership
