Registering for VAT and who is obliged to pay it

Who can register for VAT?


You can register for VAT if you’re in business in the UK, unless you only sell goods or services that are exempt from VAT or if the HMRC don’t recognise your business in their definitions.

To be in business you must, frequently and over a period of time, carry out one or a combination of these criteria:

  • Earn an income by carrying on a trade, vocation or profession, either by being self-employed or through another entity such as a limited company.

  • Provide membership benefits as a club, association or similar body in return for a subscription or other form of payment.

  • Provide certain other activities as a club or other recreational body, charity or other non-profit making body.

  • Charge admission to a premises.


Who is obliged to register for VAT?


If, over the last 12 months, your turnover of VAT taxable goods and services supplied within the UK is more than the current registration threshold, or if you expect it to go over the threshold in the next 30 days alone, you must register for VAT. If this is a temporary spike in sales you may be able to apply for exemption.

Likewise, if you’re taking over another business that’s already VAT registered you need to add your own VAT taxable turnover to that of the new business. If the joint taxable turnover is above the threshold you’ll need to go about registering for VAT.

You can find the most up to date threshold figures from HMRC.

Other circumstances in which you may need to register for VAT include:

  • If you’re receiving goods from other countries in the EU whose value totals more than the threshold in the calendar year or if you expect to acquire more than that value in the next 30 days.

  • If you’re supplying goods or services from the UK to other countries.

  • If you’re supplying goods or services to the UK from other countries.


Volunteering for VAT


Some companies volunteer to register for VAT even if they haven’t yet reached the turnover threshold.

This will mean that you can reclaim the VAT that you have to pay other companies, known as your input tax, as long as this does not exceed the amount of VAT you’re charging others for your goods and services (your output tax).

Registering for VAT may also offer others the impression that your business is bigger or more established than it really is.

It’s important to remember that you’ll have increased paperwork to complete if you’re VAT registered and you could face penalties if you don’t file your paperwork in time.

Your costs may also appear higher to your customers who will also have to pay the VAT you’re charging and, if your output tax exceeds your input tax, you’ll need to pay the difference back to HMRC at the end of the tax year.


Starting your business – VAT and more


Before registering for VAT, or even contemplating it, setting up your new business requires registration with Companies House. You can get the ball rolling on this without the need to start trading and with The Formations Company you can be up and running and ready to make your financial decisions in as little as three hours.