VAT trips up more small businesses than almost any other tax, usually because the rules are not quite what people assume. Here is what you actually need to know.
The threshold
You must register for VAT once your VAT taxable turnover goes over the registration threshold, which is currently £90,000. The figure can change at a Budget, so always check the current number, but the principle stays the same.
The catch is how the threshold is measured.
It is a rolling 12 month test, not your financial year
This is the part that surprises people. You have to register if your turnover over any rolling 12 month period goes over the threshold, not just in your accounting year. So you need to look back over the last 12 months at the end of every month, not wait for your year end.
You also have to register if you expect to go over the threshold in the next 30 days alone, for example if you win a single large contract.
What happens if you register late
If you should have registered and did not, HMRC can make you account for the VAT you should have charged, even if you never collected it from your customers. That can be an expensive mistake. Watching your rolling turnover is exactly the kind of thing we keep an eye on for you.
Should you register voluntarily?
Sometimes it makes sense to register before you have to. If most of your customers are VAT registered businesses, and you buy a lot of standard-rated goods or services, voluntary registration can let you reclaim VAT on your costs. If you sell mainly to the public, it usually does not help. It depends on your situation, and it is worth a conversation.
We handle registration, advise on the right scheme, and file your Making Tax Digital VAT returns each quarter. Get your instant quote to see your fixed fee.