If you own a business that is not registered for the Value-added Tax with HMRC, you cannot claim vat your business’s sales and purchases.
Who Should Register for VAT?
There are two types of VAT registration as compulsory and voluntary ones.
VAT registration becomes compulsory for a business when its annual turnover exceeds the set threshold of £85,000 during the period of the past 12 months. If a business has a lower turnover than the £85,000, it is not necessarily required to be registered for VAT with HMRC. Also, if a business has reasonable grounds, is expecting to meet the threshold in the next 30 days, it is too required to be registered. Even when you sell VAT exempt goods and services, but your annual purchases exceed the threshold, it is necessary for you to get your business registered with HMRC for VAT to claim VAT over your purchases.
A business can also get to be registered for the VAT voluntarily, even when its annual turnover is below the threshold of £85,000. Doing so can be beneficial for businesses in multiple ways as:
- It allows a business to make zero-rated supplies. Even output VAT will not be charged by the HMRC, but all the input VAT suffered will be recoverable.
- Voluntarily registered businesses can make supplies to VAT registered businesses. In this case, input VAT will be recoverable while output vat to their customers who can also recover vat from the HMRC.
Consequences of Late Registration
Your annual turnover is exceeding the threshold or is expected to meets. You are required to get your business registered within 30 days of meeting the set threshold or realizing to meet it in the coming days. In case of failing to get your business registered on-time, you have to pay the amount you owe to HMRC from the time when you should have registered at the point of registration.
VAT Schemes for Small Business
HMRC allows businesses to follow any of the following VAT schemes that suit them very best.
In the cash accounting scheme, a business will be paying VAT on sales when it recovers its money against sales. And it will be reclaiming VAT on purchases while paying to its suppliers. For joining this scheme, a business must have an annual turnover of £1.35 million or less.
Annual Accounting Scheme
If you join this VAT scheme, you will be able to submit your vat return once a year. It helps businesses to reduce their administrative burdens. These aspects of this VAT annual accounting scheme make it favorable for small and medium-sized businesses.
Flat Rate Scheme
In this VAT scheme, the output is measured by applying a compact fixed flat rate ratio on the gross turnover, and input vat could not be reclaimed. Businesses that join this scheme will be paying lower rates of VAT in comparison to the standard rate that can vary depending on the business nature.
VAT margin Schemes
In these schemes, HMRC charges on the difference between the price you charge to your customers and the price you paid to purchase an item instead of the full selling prices. You will be paying a fixed Vat rate of 16.67% on the difference. You can join these schemes when you sell artworks, antiques, collectors’ items, and second-hand products, while if you deal with precious goods and services, you cannot join these schemes.
Does Pr-Registration Input VAT Is Recoverable?
Yes, being a registered business, you will be able to claim per-registration input VAT. You will be able to claim input vat on per-registration purchases in the following cases.
Upon all of the purchased services for your business within the 6 months before the date of registration.
Upon non-current stock/assets purchased within the 4 years before getting your business registered with HMRC for VAT, and still, those assets are owned by your business.
How to Get Register?
Most of the business can register themselves online and can get VAT online accounts that will be used for submitting their VAT returns to HMRC. HMRC allows businesses to get registered through appointing agents to deal with your VAT registration process on your behalf.
Required Details for VAT Registration
The date when your business is registered for VAT with HMRC is known as the effective date of registration, and you will be paying any VAT to HMRC from this date. For your VAT registration to HMRC, you will need to provide information such as justification of your company’s core business activities, starting date, names and VAT numbers of all of the business stakeholders, including owners, partners, and directors of your business. Furthermore, you will require an anticipated turnover of the next 12 months period, trading business address, and complete information of your directors, including their name, national identity number, date of birth, and the current and previous home addresses.
How Can ProAccountax Help You?
ProAccountax is serving a variety of businesses from different sectors. Our accounting and taxation experts are fully aware of the evolving standards of accounting and taxation practices. In the Vat registration process, we can play our part as your registration agent in order to facilitate you in making the entire process easy and confusion-free. Our experts can help you in choosing an appropriate VAT scheme to help you in saving and claiming the maximum on your paid VAT to HMRC.