Overview of VAT Registration
VAT registration is very necessary for a person running a business. You must do VAT registration with HMRC, if your VAT taxable turnover is more than £85000. After doing VAT registration, you will get a VAT registration certificate which confirms the following –
- Your VAT number
- Your effective date of registration
- When to submit your first VAT return & payment
If your VAT taxable turnover is less than £85000, you can voluntarily go for VAT registration unless everything you sell is exempt.
You can also reclaim the VAT you have paid on buying of certain products & services before your registration.
The VAT responsibilities which you have to perform from the effective date of registration are as follows –
- Charge the right amount of VAT
- Pay any VAT due to HMRC
- Submit your VAT returns on time
- Maintain VAT records and a VAT account
Most VAT registered businesses that earn over £85,000 must also follow the rules for ‘Making Tax Digital for VAT’.
While you wait
After applying for VAT registration, you have to wait till you get your registered VAT number. You have no right to charge or show VAT on your invoices until you receive your VAT number. However, you still have to pay VAT to HMRC for this period.
You can increase your products prices and once you got the VAT number, tell your customer- why you are doing this. You can reissue the invoices showing VAT.
How to register for VAT?
Online VAT Registration
Most of the businesses apply for VAT registration online. It also includes partnerships and group of companies registering under one VAT number. By doing the online registration, you will create a VAT online account which is sometimes known as “Govt. gateway account”. You need this VAT online account to submit your VAT returns to HMRC.
VAT Registration using an agent
You can also appoint an accountant or an agent which helps you in submitting your VAT returns and deals on your behalf with HMRC. After receiving your VAT number from HMRC, you can open a new VAT account by signing up. (Select option “VAT submit returns”)
When you can’t register for VAT online
If you cannot register online, you are having an option to register by post using form VAT 1. You must register by post using VAT 1 form in the following situations –
- If you want to apply for registration “exception”
- If you want to join the agricultural flat rate scheme.
- If you are registering the business units or divisions of corporate body under separate VAT numbers.
You can register by post by using the following forms mentioned below –
- VAT 1A – This form is used if you are having an EU business distance selling to the UK
- VAT 1B – This form is used if you import goods of more than £85000 value from another EU country.
- VAT1C – This form is used if you are disposing of assets on which 8th or 13th directive refunds have been claimed.
Getting your VAT Registration Certificate
You will get your VAT registration certificate within 30 working days but it may take longer time than that. The certificate will be sent either –
- To your online VAT account
- By post – if you cannot register online or you appoint an accountant or agent for the VAT registration.
What you need to know
You need to provide the following details for VAT registration –
- Business turnover
- Business activity
- Bank account details
Your registration date will be your effective date of registration and from this date onwards you have to pay VAT to HMRC
When to register for VAT?
You have to mandatorily register for VAT if your VAT taxable turnover is more than £85,000 or you know that it is about to exceed. You can register for VAT voluntarily too. There are two types of VAT registrations –
Compulsory VAT Registration
A person has to mandatorily go for VAT registration in the following situations –
- In case you are expecting your VAT turnover to be more than £85000 in the next 30 days.
- In case your business is having a VAT taxable turnover of more than £85000 in the previous 12 months.
You might have to register in some other cases too depending upon the kinds of goods or services you are selling as well as the place where you are selling the same.
In case you are exceeding the VAT threshold in the next 30 days period
You have to mandatorily go for VAT registration in case you are exceeding or about to exceed the VAT threshold limit i.e. £85000 in the next 30 days period. You have to register within 30 days period and your effective date of registration will be the date of realization not the date where your turnover exceeds the threshold limit. For ex – On 1st May, you realized that your VAT taxable turnover will exceed the threshold limit within 30 days period. It means you have to mandatorily register by 30 may and your effective date of registration will be 1st May.
In case you are exceeded the VAT threshold limit in the previous 12 months
You have to mandatorily go for VAT registration in case you exceeded the VAT threshold limit in the previous 12 months i.e. £85000. You have to register within 30 days of the end of the month when you crossed the threshold limit and your effective date of registration will be the first day of the second month after crossing the threshold limit. For ex – Your VAT taxable turnover was £100000 between 10 July 2017 and 9 July 2018 and it’s the first time when it exceeds the VAT threshold limit of £85000. It means you have to mandatorily register by 30th August 2018 and your effective date of registration will be 1 September 2018.
If you selling VAT exempt Goods & Services
You can only register in this case if you sell goods or services that are VAT exempt but you are buying goods for more than £85000 value from EU VAT registered suppliers and using the same in your business too.
If you take over a VAT registered business
You may have to register for VAT if you take over a VAT-registered business.
Business outside UK
There is no threshold limit for you if you & your business is based in UK. You have to mandatorily register if you are supplying or want to supply any goods & services to the UK and you are expecting the same in next 30 days.
In case of late registration you may have to pay a penalty depending upon how much you owe and how late you have registered.
Voluntary VAT Registration
In case your business turnover is below £85000, you can register voluntarily for VAT registration. You must pay VAT to HMRC from the date you get registered under VAT.
Get an Exception
In case your taxable turnover exceeds the VAT threshold limit i.e. £85000 temporarily, you can apply for a registration “exception”. To apply for exception, you have to write to HMRC with the evidence that why you think that your VAT taxable turnover will exceed the threshold limit of £85000 in the coming 12 months. If HMRC satisfy with the letter and the evidences you have shown, they will consider your exception and confirm it in writing. If you will not get the exception, they will register you for VAT.
Calculate VAT Taxable Turnover
VAT taxable turnover means totaling the value of everything you sell that is not VAT exempt. You have to mandatorily register for VAT with HMRC in case you exceed the threshold limit in current 12 months period. It could be any period. For ex – The start of July to the end of August. The current threshold limit is £85000 and it generally goes above on April 1 every year.
What to include
In order to check that if you exceeded the VAT threshold limit in any 12 months period, you have to add together the total value of your UK sales that are not exempted from VAT including –
- Business goods used for personal reasons
- Goods you hired or loaned to customers
- Goods you bartered, partly exchanged or given as gifts
- Services you received from business in other countries that you had to reverse charge.
- Building work exceeding £100000 for your business
You can also include any zero rated items. You can only exclude VAT exempt sales, supplies of goods & services outside UK.
If you exceeds the threshold
In case your taxable turnover exceeds the VAT threshold limit i.e. £85000 temporarily, you can apply for a registration “exception”. You should check your rolling turnover regularly if you are close to exceeding the threshold limit.
Purchase made before registration
There is a time limit imposed for backdating claims for VAT paid before the registration. The time limit from your date of registration is mentioned below –
- 4 years for goods you still have or that were used to make other goods you still have.
- 6 months for services
In case you want to reclaim VAT, you can reclaim VAT only on purchases done for the business. It must specify your business purpose. You must reclaim VAT on your first VAT return and maintain records including –
- A description & purchase date
- Invoices & receipts
- Information about how they relate to your business now
Changes in VAT Registration Details
You have to mandatorily update your VAT registration details and you can make changes to your details –
- Through your VAT account online
- By post – Filling form VAT 484
You have to mandatorily send form VAT 2 to the VAT registration service for reporting any changes to a partnership. Some changes can affect your VAT registration or you may have to cancel it.
When to tell HMRC
In case of any change, you need to tell HMRC within 30 days or you will face a financial penalty. The changes can be the following –
- Change in name, trading name or main address of your business.
- Change in accountant or agent dealing with VAT.
- Change in the member of a partnership firm
- Change in name or home address of any of the partners.
Changing Bank details
In case you are changing your bank details –
- You have to mandatorily tell HMRC at least 14 days in advance.
- You have to tell bank to change your direct debit details too in case you are paying VAT by direct debit.
You don’t have to tell bank to change your direct debit details within 5 banking days before or after your return is due. To change your direct debit details, you must write to the annual account ting registration unit, if you are using the annual accounting scheme. You must include your registration number into the written letter.
Death & Illness
In case you want to take the VAT responsibilities of someone who is ill or died, you have to mandatorily tell HMRC within 21 days. You can do so by sending form VAT484 by post. The form VAT484 contains the details of date of illness or death date of a concerned person.
Cancel VAT Registration
You have to mandatorily cancel the registration if you are no longer eligible to be VAT registered. There are many examples in which a person cancels his VAT registration. Some of the examples are given below –
- If you stop trading or making VAT taxable supplies.
- If you joined a VAT group
If you are not eligible, you must cancel your registration within 30 days.
How to cancel VAT Registration Online
You can cancel your VAT registration online. Go through “Deregister for VAT”
You can also fill in and send form VAT7 to deregister for VAT by post.
Transfer VAT Registration
Registration can be transferred from one business to another. For ex – In case you want to take over a company and want to keep using its VAT number. You can transfer a VAT registration by the following ways –
- Through your VAT accounts online
- By post – filling form VAT68