Do I need to register for VAT?

When running a new business, there are 'a million' different things to think about.  And although most businesses have a fairly good idea what VAT is, we are very often asked, 'Do I need to register for VAT?' and perhaps even more importantly, 'When do I need to register?'  

Value Added Tax (VAT) is added on to the cost of nearly everything you buy in the UK. It is paid for by consumers and collected by business on behalf of the government. Therefore, if you’re a business, you may be required to register for and collect VAT. 

What is the VAT rate

The default VAT rate is the standard rate at 20%. Some goods and services are subject to VAT at a reduced rate of 5% (such as domestic fuel) or 0% (such as most food and children's clothing). Others are exempt from VAT or outside the system altogether. 

How does VAT work

VAT is charged when a VAT-registered business sells goods or services, whether to another business or to a non-business customer. When a business charges VAT on a sale they are collecting that money on behalf of HM Revenue & Customs (HMRC). If a business is VAT registered, they can reclaim the VAT they have paid on purchases related to their VAT-able sales.

How do I register for VAT?

You must register your business for VAT with HMRC if its VAT taxable turnover is more than £90,000 (since April 2024).  Most businesses can register online. By doing this you’ll register for VAT and create a VAT online account (sometimes known as a ‘Government Gateway account’). You need this to then register for Making Tax Digital to be able to submit your VAT Returns to HMRC electronically.

Under certain circumstances you may not be able to register online, in these instances you must register by post using the VAT1 form.

VAT penalties for late registration

Failure to register for VAT on time means you can be liable to a VAT penalty. The VAT penalties for late registration will be between 5% and 15% of the VAT due depending on the lateness of the notification, with a minimum charge of £50.

‘VAT registration is a legal obligation, failure to

adhere to these rules can lead to substantial penalties and in

the worst cases a custodial sentence.’

VAT remains one of the least understood of all taxes, which is why Shorts created a specialist VAT advisory department, to help businesses through the complex maze of VAT legislation.  Our team help with all areas of VAT from relatively basic issues such as initial registration, the completion and submission of VAT returns and advice on how to correct errors and mistakes, through to more complex issues such as assessments, control visits, cross border transactions and DIY house builds. 

Whatever your VAT query; why not get in touch, and discuss any concerns you may have with a member of our team.

Other related artices;

• What is VAT - an overview of Value Added Tax
• 7 Commonly made VAT Mistakes
• VAT and Landlords - The Option to Tax Property