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Kirk Rice Blog

VAT Registration Requirements For BusinessWritten on October 1, 2019 by Kirk Rice LLP

VAT Registration Requirements For Business
Taxing Times Questions

The Question:

I have been running my own business for a few years now and so far I have not registered my business for VAT. I know that VAT registration is not currently necessary, but I may need to soon. When do I have to register?

Kirk Rice LLP answers:

Whether VAT registration is necessary for a business is based on a number of factors one of which is the current business turnover, and I suspect that is what has prompted your question. However, that is only one consideration, as some businesses may be exempt from VAT because of the nature of the business.

Accordingly, the first step is to consider whether VAT registration is possible, desirable or compulsory.

Possible – VAT registration is only possible when a business has taxable supplies i.e. the goods or services provided are, classed as those that require the standard or zero rate of VAT to be applied to them. Another way of looking at it is that, those supplies that are not classed as exempt. Examples of exempt supplies include:

  • Certain selling, leasing and letting of land and buildings
  • Insurance
  • Certain education or training
  • Providing credit

(This is not a full list.)

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Desirable – Where a business trades exclusively with other businesses that are already VAT registered, then it will generally be desirable for the business to also register, regardless of whether it is compulsory to do so. This is because the purchasing business will be able to recover the VAT charged to them from HMRC. The benefit in registering is that the business will then be able to recover the VAT it is charged by other businesses, which clearly gives a financial advantage. This is contrast with a business whose customers are the general public where the additional 20% VAT is a cost to them. The VAT would make selling prices more expensive, in which case VAT registration is probably not desirable, as it could make the business not commercially viable.

Compulsory – Where a business is providing taxable supplies, and the total sales in any 12 month period exceeds the compulsory VAT registration threshold (currently £85,000) the business must register for VAT and charge VAT on its sales. Where a business is in the ‘undesirable’ category, but knows it is near the compulsory threshold, it is important to closely monitor turnover on a rolling 12 months basis to ensure they register at the correct time.

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Any reader interested in getting some help with deciding whether you should register your business for VAT, should email info@kirkrice.co.uk to arrange a call with one of our financial planners.

Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. The FCA does not regulate tax and trust advice.