A business should register for VAT if their ‘Taxable Supplies’ over the past 12 months have exceeded the VAT registration threshold. From April 2017, the VAT registration threshold has been £85,000. Therefore, if at the end of any month, the total value of all the taxable supplies over the previous 12 months is greater than the threshold, the business should register for VAT.
“Taxable Supplies” are any goods or services that subject to VAT and that have taken place in the UK.
In addition to this, if a business has a reason to believe their annual turnover will exceed £85,000 within the next 30 days, then they should register for VAT.
How to seek permission to not register for VAT
If a business has crossed the £85,000 threshold, but only believes that this will be temporary, it is possible to avoid registration.
To do so, the business will need to contact HRMC and explaining exactly why they are not registering. In this, they would need to explain why their annual turnover will not exceed the de-registration threshold of £83,000 and provide documentation to support this.
If the company is successful in their request, and HMRC allows you to avoid registering on this occasion, then you must let them know if your circumstances change again in future.
How voluntarily registering for VAT can be beneficial
If a company does not meet the legal requirement to register for VAT, they may still choose to voluntarily.
This is because, if they are registered, they can claim back VAT that they have paid on any business purchases. Even if a company has not made any sales, they can still claim the VAT back on their purchases.
If you register voluntarily, you may still be able to reclaim the VAT you paid when initially starting your business. However, it is worth checking the rules for reclaiming VAT purchases made before registering by checking the HMRC website here.
A major benefit of being VAT registered is potentially giving the impression that a company is bigger than it is, which could enhance your image with clients.