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When Should You Register for VAT?

When do you need to register for VAT with HM Revenue and Customs in the United Kingdom? This section explains about taxable turnover for small businesses and VAT registration thresholds.

VAT REGISTRATION: Find out how to register for Value Added Tax in UK.

You need to register with HMRC if your company generates more than £85,000 of VAT taxable turnover.

VAT Registration is necessary for you to pay business sales tax. HMRC will issue your business with a value-added tax registration certificate.

Note: These VAT registration guidelines ‘Cofrestru ar gyfer TAW‘ are also available in Welsh language.

The certificate states three important pieces of information such as:

  1. Your individual registration number for Value Added Tax.
  2. The date you must submit your first VAT Return and payment.
  3. Confirmation of the start date if you voluntarily register, or if your company goes over the VAT Registration threshold. This identifies the ‘effective date of registration’.

Note: You can choose to register for value-added tax status even if your company turnover is below the threshold. But you cannot register voluntarily if you only sell exempt items (e.g. educational materials). You will have some regulatory responsibilities after registering for VAT in the UK.

VAT Payment Responsibility

Starting from the effective date of registration, your requirements include:

  • Apply the correct amount of sales tax to transactions.
  • Have a VAT account and record its transactions.
  • Complete all your VAT Returns before the deadlines.
  • Give HMRC information including your turnover, bank details and the type(s) of business activity.
  • Make payments to HM Revenue and Customs for all amounts owed to them.
  • Pay HMRC any sales tax due from your ‘effective date of registration‘.

Note: You can reclaim value-added tax paid on some items that you purchased before your registration date.

Waiting for a VAT Number

How and When Should You Register for VAT in the UKBefore your VAT Registration comes through you cannot show Value Added Tax on your invoices. But you can increase the invoice amount to take account of the extra sales tax.

You should explain the reason for the increase to your clients. You can then issue a new invoice showing the unique number once you have your VAT Registration.

You will have to pay VAT to HMRC on invoices during this period, even if you did not increase the price.

How to Register for VAT

As a rule, most companies use online registration. This applies for a partnership or a group of businesses using a single registration number.

Your Government Gateway account is your online account and registers your number. You use this account for your VAT Returns to HMRC.

Using an Authorised Agent

You can appoint an authorised agent to handle your sales tax returns and deal with the HMRC. The agent can be your accountant, a family member or a friend. If you do not have a Government Gateway account you can apply for an online account. Select the ‘VAT submit returns‘ option if you choose this method.

Note: You can register you own VAT account. You do not need an authorised agent.

Reasons Why You Cannot Register Online for VAT

You are not eligible to apply online and must apply by post using form VAT1 if you:

  • Are applying for the ‘registration exception’ (see below).
  • Are an EU based company which is distance selling in United Kingdom.
  • Are importing products from an EU country.
  • Join the Agricultural Flat Rate Scheme.
  • Are a corporate body using different VAT numbers for your businesses or divisions.
  • Have claimed a refund on assets under the 8th or 13th Directive and are now disposing of them.

VAT Registration Certificate

As a rule, your VAT Registration Certification gets issued within 14 working days. You will receive the certificate either by your Government Gateway account (online account) or by post.

When to Register for VAT

The current VAT threshold is £85,000. You need to register if you exceed this, or expect to. Subtract exempt items from everything else you have sold to calculate VAT taxable turnover.

Compulsory VAT Registration

VAT Registration is compulsory when:

  • Your taxable turnover goes above the VAT registration threshold of £85,000 in any 12 month period.
  • You import more than £85,000 worth of products from other European Union countries.
  • You expect to exceed £85,000 within any 30 day period.

If you are not resident, or the business is not incorporated in the UK, there is no upper threshold. If you supply products in the UK, or intend to in the next 30 days, you must register.

VAT Registration may also be compulsory if you buy or take over a company that is already registered.

Late Value Added Tax Registration

If your company turnover exceeds the threshold in any 12 month period, you have 30 days to register. You are liable from the date you should have registered and not when you ‘actually‘ register.

Note: Late registration can result in a financial penalty. The severity depends how late and how much you owe.

Voluntary VAT Registration

You can choose voluntary registration, even if your turnover is below the threshold. You are liable for payments from your registration date.

VAT Exception

In some cases you can get a registration ‘exception‘. Generally, this occurs for a temporary increase in turnover above the threshold. You should write to HMRC for an exception. You cannot use an online account for this purpose.

You will need to supply evidence showing the turnover is not expected to exceed £85,000 for the next 12 months. Contact the department for VAT: registration applications, exceptions and changes.

This amount is the de-registration threshold and not the registration threshold! HMRC will confirm their findings in writing. You will need to register for VAT if they reject your request.

VAT Registration: How and When Should You Register for VAT in United Kingdom?