In the UK, businesses must register for Value Added Tax when the value of its taxable supplies exceeds the registration threshold. This figure is currently set at £83,000 per annum for the 2016/17 tax year.

Even if a company doesn’t generate this amount of income, they can still register for VAT voluntarily if this suits their business model.

You can voluntarily register for VAT if it suits your business.

Only VAT registered companies are allowed to charge VAT and must inform the HMRC when doing so – this can be done online through a Government Gateway account. The same company can then also reclaim any VAT they’ve paid on business-related transactions.

The standard rate of VAT is set at 20% which is added to the transaction of most goods and services. There are three further rates, listed below with examples:

Reduced Rate set at 5% – Women’s sanitary products, domestic fuel bills, children’s car seats.

Zero Rate set at 0% – Children’s clothing, public transport, newspapers.

Exempt Rate set at 0% – Insurance, betting and gaming, charity donations.

How to Register for VAT

Here is a step-by-step guide on how to register as a VAT business. If earning below the threshold and unsure whether doing so will benefit your company, seek professional guidance at this stage. An accountant will also ensure no errors are made during the registration phase and create a tax-efficient returns model for your business.
The easiest way to sign up is online by visiting the government website and following the on-screen instructions.

  • If you already have an existing Government Gateway ID, you can use this to sign into your account. Under the new ‘Making Tax Digital’ plans, all of your tax information will be available to view and edit under this same account.

Making Tax Digital will be universal in 2020 and should make paying VAT easier.

  • For users without log-in details, you can register by selecting ‘Don’t have a Government Gateway account’ and then choosing the type of account you’d like to create. An email and password must be entered, presenting you with a new Gateway number.
  • The HMRC will then require all of your business information and bank details to complete the registration. Once finalised, this will become the ‘effective date of registration’.
  • You will be sent a VAT registration certificate within 14 working days, either online or via post, though it can take longer in some cases.

Further VAT Advice

Once VAT registered, your business now takes on a few extra responsibilities. You must charge the correct amount of VAT on the relevant goods and services, as noted above, and pay any VAT due to the HMRC.

Make sure you understand the responsibilities of being VAT registered.

To ensure no mistakes are made during this process, you must keep accurate records and ensure they’re maintained on a regular basis. Negligence on your part can result in fines and penalties when submitting your VAT returns.

You can also appoint an accountant – referred to as an agent – to act on your behalf when registering for VAT. They must be fully authorised to do so, but will save your company time and money when dealing with complex returns.

If you’d like help registering your business for VAT, get in touch with us.
Would you like to know more about HMRC’s Making Tax Digital? You might be interested in how the new quarterly tax returns will realistically affect your business.