Are you a business owner who has seen your income/turnover rise above the £85,000 VAT threshold?
Do you expect turnover to be over £85,000 in the next 30 days?
If you have answered yes to either of these questions, you need to be clear on the nuts and bolts of registering for VAT.
It can be difficult to know the exact rules and requirements for when a business needs to register for VAT, particularly for new business owners.
That is why we have created a Q & A style guide that covers the most important questions you might be asking yourself.
Who should register for VAT? (and When?)
The current VAT threshold stands at £85,000.
If your business has reached the current VAT taxable turnover threshold of £85,000 in the past 12 months, or it will do within the current tax year you must register for VAT.
When you should be registered for VAT is down to the date at which you expect to/have reached the threshold.
Businesses that do not register for VAT when their turnover grows beyond the threshold could be faced with a large fine from HMRC.
How do I calculate my turnover?
HM Revenue & Customs (HMRC) defines turnover as sales without VAT. This is assuming the business is already registered for VAT, as the VAT element is not money the business will keep.
At this point, you might be wondering how to calculate your turnover.
Turnover is classed at the total value of everything your business sells that is not exempt from VAT including:
- Goods hired or loaned to customers
- Zero-rated goods
- Business goods used for personal use
- Bartered or part-exchanged goods
- Goods given as gifts
How do I register for VAT?
Registering for VAT is relatively straightforward.
The two main ways to register for VAT are as follows:
- Register online using a Government Gateway ID
- Fill out a paper VAT1 form
You’ll need the following to hand when you register:
- Business contact details
- Details of your turnover and the nature of the business
- Bank account details
- Unique Tax Reference (UTR) number
Which VAT Scheme should I choose?
VAT Schemes are designed to give businesses a bit of breathing room when it comes to paying their VAT. These schemes also cover the various situations unique to each business in terms of turnover. This is usually in line with the nature of the business.
There are many categories of VAT that you should consider before registering for VAT.
For example, with the Annual Accounting VAT Scheme, you’ll make advance payments on VAT towards the current year’s VAT based on your previous return or an estimation.
If you are a new business owner, knowing what you need to pay in VAT, and the difference between each VAT scheme is essential.
If you need advice on the different VAT schemes or need assistance registering for VAT, contact us today.