Our tax preparation specialists tell you all about registering your business for VAT

At DSR Tax Claims Ltd, we know that sorting out the VAT for your business can be a tricky task. That’s why our experts want to help make life as easy as possible for you by sharing our specialist knowledge with you. So, whether you are wanting more information about VAT or need to know about charitable tax relief, our handy guides are here to help. All our information is based on HMRC sources, so you can rest assured that these guides are filled with helpful and accurate information.

Who needs to register for VAT?

If your business has a VAT-taxable turnover greater than £85,000 you must register for VAT with HMRC. VAT-taxable turnover is the total value of everything you sell which is not exempt from VAT.

Once you register, you will receive a VAT registration certificate from HMRC. It will include the following information which you will need for your VAT returns:

  • Your VAT number
  • The ‘effective date’ of your registration – it will be the date that you registered, if it was a voluntary registration, or the day you went over the threshold otherwise.
  • The date on which you will need to submit your first VAT return and make your first VAT payment to HMRC.

You have the choice to register voluntarily if you wish, if your turnover is below £85,000, unless everything you sell is VAT exempt.

Until you get your VAT number, you are not allowed to charge VAT or show VAT on your invoices but unfortunately, you will still be expected to pay VAT for this period. HMRC recommends that you increase your prices to allow for this period and explain to your customers why you are doing so. HMRC states you can then reissue the invoices to show the VAT once you have your VAT number.

How do you register?

Register online: most businesses have the option of registering online for VAT. Partnerships and groups of companies, which are going to register under one VAT number, can also register online. When you register online for VAT, you will create a ‘VAT online account’ (which is the same as a Government Gateway account). You will need this account to submit your VAT returns to HMRC.

Register using an agent: if you wish, you can appoint an agent or accountant to deal with your VAT on your behalf. They will submit your VAT returns and deal with HMRC enquiries on your behalf. You don’t need to authorise an agent to register you for VAT.

If any of the following circumstances apply to your business, you don’t have the option to register online.

Register by post:

You are not allowed to register online and must use form VAT1 and register by post if:

  • You are joining the Agricultural Flat Rate Scheme
  • You are registering business divisions or units of the same group of companies under separate VAT numbers
  • You want to apply for a registration exception – for example, if your business has gone over the £85,000 threshold but it is only a temporary situation.

You are not allowed to register online and must use form VAT1A and register by post if:

  • You are an EU business and you are distance selling to the UK.

You are not allowed to register online and must use form VAT1B and register by post if:

  • You import (or acquire) goods worth more than £85,000 from another EU country.

You are not allowed to register online and must use form VAT1C and register by post if:

  • You are disposing of assets on which you have already claimed 8th or 13th directive refunds.

Even if you have been required to register by post, once you have received your VAT number from HMRC you can sign up for a VAT online account. You will need to select the ‘VAT submit returns’ option.

Other information:

You should receive your VAT certificate from HMRC within 30 workings days, although it can take a little longer during busy periods. It will be sent to your VAT online account, unless you have been registered by an agent or you are not allowed to register online.

To register for VAT, you will need to provide details of your business turnover, your bank details and information about your business activities.

When do you need to register for VAT?

If your VAT taxable turnover goes over the £85,000 threshold, you need to register for VAT. You will also need to register if you are aware that it will exceed the threshold. Your VAT taxable turnover means the total of all your sales which are not exempt from VAT. If you wish, you can register voluntarily.

You are required to register (compulsorily) if the following apply to your business:

  • Your business had a VAT taxable turnover of over £85,000 over the previous 12 months
  • You expect your VAT taxable turnover to be over £85,000 in the next 30-day period.

There are other instances where you might be required to register, depending on what goods or services your business sells and where you do business.

If you expect your turnover to exceed the threshold in the next 30 days: If you know your total VAT taxable turnover is going to be over £85,000 in the next 30 day period, you will need to have registered for VAT by the end of that 30-day period and your effective date will be classed as the date you realised you would exceed the threshold, not the day that your business actually did exceed the threshold.

If your turnover exceeded the threshold in the previous 12 months: you need to register by the end of any month where your total VAT taxable turnover has exceeded £85,000 over the last 12 month period. You must register within 30 days of the end of the month in which the threshold was exceeded for the first time. Your effective date of registration will be the first day of the second month after you go over the threshold.

If the goods and services you sell are VAT exempt: if you buy goods worth more than £85,000 from EU VAT registered businesses for use in your business, but you only sell goods or services which are exempt from VAT or considered ‘out of scope’, you will still need to register for VAT.

If you take over a VAT-registered business: you may be required to register for VAT dependent on turnover.

If your business is based outside the UK: you will need to register as soon as you supply any goods or services to the UK, or you expect to within the next 30 days. There is no turnover threshold if you or your business is based outside the UK.

If you register late: you need to pay what you owe in VAT from when you should have registered, not when you actually did register. You may also receive a penalty depending on how much you owe and how late your registration was.

If you register voluntarily: you must pay any VAT you owe from the date you are registered by HMRC, even if your turnover is less than £85,000.

If you wish to apply for an exception: if you have only exceeded the £85,000 threshold temporarily, you can apply for a registration exception from HMRC. You will need to write to HMRC with evidence showing why you think your VAT taxable turnover will not exceed the de-registration threshold of £83,000 in the next 12 months. Once HMRC have received your application, they will consider it and then write to you to inform you whether they have granted you an exception. If they don’t, they will register you for VAT instead.

What are the VAT responsibilities?

Once you register for VAT, you must do the following:

Under certain circumstances, you can also reclaim any VAT you have paid on certain items before you registered for VAT. These items must be for the business which is now VAT registered and must have been purchased for business use. The VAT for these purchases can be reclaimed in your first VAT return.

What if you need to register for VAT in other EU countries?

In most instances, you only have to register for VAT in the country in which you are based. However, if you supply digital services to customers based in other EU countries, you must do one of the following:

  • Sign up for the VAT MOSS (Mini One Stop Shop) service to allow you to report and pay VAT on those digital sales
  • Register for VAT in each of the countries in which you make those digital sales.

You are required to do this even if your turnover is below the VAT threshold of £85,000.

Digital services include the following:

  • Software
  • E-books
  • downloadable music
  • telecommunications services
  • video on demand services
  • games or apps
  • broadcasting

How do you calculate your VAT taxable turnover?

Your VAT taxable turnover is classed as the total value of everything you sell (goods and services) that is not exempt from VAT.

The current threshold is £85,000 and it usually increases on 1st April each year. If your VAT taxable turnover goes over that threshold in a rolling 12-month period, you must register for VAT. A rolling period is not a fixed period like a calendar year or tax year, it can include any 12 month period and will keep rolling forwards each month to take in the previous 12 months.

To calculate your VAT taxable turnover in any 12 month period you need to include the following sales (as long as they are not VAT exempt):

  • Goods you part-exchanged, gave as gifts or bartered for services or goods in return
  • Goods you hired or loaned to customers
  • Services you received from businesses in other countries which were ‘reverse-charged’
  • Building work over £100,000 which your company did for its own benefit
  • Any business goods which were used for personal reasons or non-business use

You also need to include any zero-rated items. The only excluded items are VAT-exempt sales (which is not the same as being zero-rated) and goods or services which you supply outside of the UK.

If you exceed the £85,000 threshold and are not already VAT-registered, you must register straightaway. This means you should check your rolling turnover on a regular basis, especially if you are close to the threshold.

What were the previous thresholds?

The previous Vat thresholds were:

Period covered VAT threshold
1st April 2010 to 31st March 2011 £70,000
1st April 2011 to 31st March 2012 £73,000
1st April 2012 to 31st March 2013 £77,000
1st April 2013 to 31st March 2014 £79,000
1st April 2014 to 31st March 2015 £81,000
1st April 2015 to 31st March 2016 £82,000
1st April 2016 to 31st March 2017 £83,000
1st April 2017 to 31st March 2018 £85,000

How do you treat purchases before registration?

You can backdate refund claims for purchases made before you register for VAT but there are time limits which you need to be aware of.

For goods that you still have or goods that we used to make other goods that you still have, you need to backdate your claim within 4 years of VAT registration.

For services, you only have 6 months from registration to backdate your VAT claim.

The purchases must have been for the business which is now VAT registered and must have been purchased in relation to your ‘business purpose’. As far as HMRC are concerned, this means they must relate to VAT taxable goods or services which your business supplies.

To reclaim this VAT, add them into your Box 4 figure on your first VAT return. You will need to keep records to support this refund, including the following:

  • A description of the item and purchase date
  • Invoices and receipts
  • Information on how they relate to your business now.

What if you need to change your details?

It’s really important to keep your VAT registration details up to date. You can make any changes online, using your VAT online account. You can also send form VAT484 through the post.

If you are reporting changes to a partnership, you need to send form VAT2 to the VAT Registration Service.

Some changes may affect your VAT registration and could mean you have to cancel it.

What changes do HMRC need to know about?

Changes to the following information must be notified to HMRC within 30 days or they could issue you with a penalty:

  • The name or trading name, or the main address of the business
  • The members of any partnership, or the name or home address of any partners
  • The accountant or agent who handles your VAT.

If you are changing your bank details, HMRC must be informed at least 14 days in advance of the change.

If you pay your VAT by Direct Debit, you will also need to inform your bank that they will need to change the details of the Direct Debit – however, you can’t do this within 5 banking days before or after your VAT return and payment are due.

If you use the Annual Accounting Scheme, you will need to write to the Annual Accounting Registration Unit to change your Direct Debit details.

If you have taken on the VAT responsibilities of someone who has just died or is too ill to do them themselves, you need to inform HMRC within 21 days. You need to do this by sending form VAT484 and include details of the date of death (or date the illness started).

When would you cancel a VAT registration?

If you are no longer eligible to be VAT registered, you must cancel your registration. You need to cancel within 30 days or you risk receiving a penalty from HMRC. You can also ask HMRC to cancel your registration if your VAT taxable turnover falls below HMRC’s de-registration threshold of £83,000.

You can cancel your VAT registration online by logging into your VAT online account. You can also send form VAT2 by post if you prefer.

What happens when you cancel your VAT registration?

It will take HMRC around 3 weeks to confirm that you are no longer registered for VAT. They will also inform you of your official de-registration date. This date will either be the date your asked to de-register (if it is a voluntary de-registration) or the date that the reason for your de-registration came into effect (for example, when your business stopped trading).

If you have an online account, you will receive this confirmation online. Otherwise, you will receive it by post. From your official de-registration date, you must stop charging VAT.

You will need to keep your VAT records for 6 years after de-registration.

If HMRC believes you should not have de-registered for any reason, they will re-register you automatically and you will be required to account for any VAT that you should have paid but have not during the period of de-registration.

Once you cancel your VAT registration, you will have to send a final VAT return to account for the period up to and including the date of de-registration. If you have any stock or assets left at this date, you must account for them in your final VAT return if you could reclaim the VAT when you bought the stock or assets and the total VAT due on them is greater than £1,000.

You should not wait to get all your final invoices before you submit your final VAT return. You can reclaim any VAT on those purchases you made for your business while it was still registered once you get the invoices.

Can you transfer your VAT registration?

HMRC does allow you to transfer VAT registration from one business to another. You can apply for a VAT transfer either online through your VAT online account or by sending form VAT68 by post.

If, for example, you have bought a business and want to use its existing VAT number, both the buyer and seller of the business need to inform HMRC of the VAT transfer. The seller should then cancel any Direct Debits they have set up on their VAT online account. The buyer will then be able to set up new Direct Debits.

It usually takes around 3 weeks for HMRC to confirm that the VAT registration has been transferred.

The seller may also have to do the following:

  • Cancel their accountant or agent’s access to their VAT online account, if applicable.
  • Pass on their business records to the buyer if they are transferring their VAT number.

The buyer may also be required to do the following:

  • Contact HMRC within 21 days if they wish to continue using the same accountant or agent as the seller.
  • Replace any self-billing arrangements with new ones relating to the buyer.
  • Register for VAT from the date of the business transfer.

How can DSR Tax Claims Ltd help?

We know that making sure your VAT registration is correct can be time consuming – there’s so much to consider and that’s before you actually start sending VAT returns. Our friendly team of tax specialists at DSR Tax Claims Ltd are on hand to help make life easier for you. We’re the experts at identifying your maximum allowable expenses so call us on 0330 122 9972 – we’re the tax experts you can trust.