Do I need to register for VAT?

When running a new business, there are a million different things to think about. Although most businesses understand 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?' Often, by the time we are asked these questions, the business should already have been registered for VAT and be charging VAT to customers.

Value Added Tax (VAT) is added to the cost of nearly everything you buy in the UK. It is paid for by consumers and collected by businesses 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 books and children's clothing). Others are exempt from VAT, e.g., insurance, or outside the scope of VAT altogether.

How do businesses charge VAT?

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, it can reclaim the VAT it has paid on purchases related to its 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 in a consecutive 12-month period. Most businesses can register online. 

To do this, you’ll need to set up a Government Gateway account. If you apply for VAT registration online, your business will be automatically registered for Making Tax Digital (MTD). This enables you to comply with MTD requirements and submit VAT returns using an accounting package or bridging software.

Under certain circumstances, you may not be able to register online. Instead, 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 for 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.

Get your business registered for VAT

VAT is one of the most complex taxes for businesses to navigate, which is why Shorts created a specialist VAT advisory department. 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 VAT 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.