On 1 April next year, it will be exactly half a century since Value Added Tax (VAT) came into effect as a levy on the supply of many goods and services through business transactions.

Looking ahead to the next fifty years, registering for VAT is now a relatively straightforward process that can be done online; in fact, it can be beneficial in some ways for a business.

When to Register a Business and Late Applications

Under the rules, a business must register for VAT if, by the end of any given month, total VAT taxable turnover for the previous 12 months was over £85,000.

Taxable turnover simply refers to income from goods and services that are liable for VAT payments. Some business sectors have exemptions, such as food and children’s clothes.

You have within 30 days of the end of that month to register and your registration date then becomes the first day of the following month.

The standard rate of VAT is 20% and there is a reduced rate of 5% for some goods and services, such as home energy.

If you are late to register, VAT payment must be made on any sales that have taken place since the date you should have registered.

A penalty may also be paid, depending on how much is owed and how late the registration is.

It is worth noting that businesses are able to register for VAT voluntarily, and at any time if they are below the £85,000 threshold.

Registering for VAT – Role and Responsibilities

Not surprisingly, once registered for VAT, you have a number of responsibilities – some of which may seem obvious – but are set out clearly as a requirement by the government.

You must start including VAT in the price of all goods and services that you charge your customers, making a record of not only that amount, but also how much VAT you have paid to other businesses such as suppliers and wholesalers. The second of these amounts can be ‘claimed back’ and offset on your next VAT return.

These sums will go on your VAT return to HMRC that must usually be filed every three months.

Feeling the Benefits of Registering for VAT

The obligation to keep good records is where those who are VAT-registered can start to feel a benefit.

Record keeping can give you some insight into your own business activities that you might not otherwise have the time to digest and enable you to create a business plan.

For example, you will see your spending trends with your wholesalers and suppliers, and you will be able to spot the times when your own sales are up and down.

There is also a benefit of registering for VAT even if your taxable turnover is below the £85,000 threshold.

Being a small or micro business with a VAT registration number can serve as a marketing tool. When added to invoices and letterheads, it shows you are serious about what you do and reflects your own ambition for your business.

Need Help Registering for VAT? Contact Us

Registering for VAT can be straightforward, but it can also be daunting if you are uncertain about the rules and if they are appropriate to you.

Not only are there exemptions on some goods and services but also certain types of business and their locations must also be taken into account.

And of course, VAT-registered companies are affected by the government’s Making Tax Digital drive and how they file their VAT records using dedicated software.

If you are unsure about any matter involving VAT and registering your business, then speak to the experts.

Contact us at Sherlock Accounts; we would be delighted to help you!