A common question we hear from new business owners in Wetherby is, “Do we need to register for VAT?”
In todays quick guide we aim to provide some simple tax advice and information to help you answer this very important question.
Do I need to register?
As of April 2018, you are not required to register for VAT until your year to date business turnover is more than £85,000. However, you can register voluntarily at any time, even if your turnover is below this figure. So, is voluntary registration right for you?
You may want to consider registering for VAT as it will allow you to recover any VAT you pay on purchases of trading goods, expenses, or equipment for your business. You could potentially even claim back VAT that you paid prior to registration.
In a word: Compliance. By registering you are agreeing to abide by strict compliance responsibilities and must ensure that you:
- Charge the correct amount of VAT. Although this sounds simple, in reality the usual 20% may not apply and it’s best to seek the advice of a professional accountant who can help show you how to charge the correct amounts.
- Pay over any VAT collected on or before determined payment deadlines. Missing a deadline isn’t the end of the world but it’s a headache that is easily avoided with the right VAT advice and planning.
- Submit regular VAT returns. Again, if you’re unsure about your deadlines, it is always suggested to seek professional advice where needed.
- Keep VAT records including a VAT account. A good piece of software, such as Xero, can really help to simplify this task, however it’s worth remembering to always keep backups of your information.
Having a knowledgeable local tax accountant to assist you with, not only the type of scheme to select, but also with ensuring that your VAT is submitted correctly, on time and then backed up can be both time and cost effective.
That’s the basic gist of it all, however it wouldn’t be tax without a little bit of confusion added in for good measure.
To make VAT a little more tricky to naviate, there are numerous special schemes that allow you to calculate the amount of VAT due based on one of several different methods:
- A single flat percentage rate applied to your turnover including VAT.
- Special schemes for retailers.
- Payment of VAT when you are paid by your customers, not when you issue a VAT invoice.
It is important to note that all of the above schemes require that your business submit a quarterly return to HMRC. You can also elect to submit an annual return and make regular payments on account.