Should I register for VAT?
The importance of registering for VAT
During any 12 months, if your income exceeds the VAT threshold, you must legally register for VAT. Voluntary registration gives you some benefits, such as claiming back the VAT on your purchases. Then also, to impress your clients that you are a large company earning more than the VAT threshold. At the same time, there is a couple of downside to registering for VAT. You need to add vat to your products or services, but of course, you can claim the VATback. The issue here is that if the vat on sales is more than the vat on purchases, you have to pay the difference to the tax office. Another point is more paperwork for you.
Limit, consequences, charity VAT
Those setting up a new business sometimes think they cannot register for VAT until they have reached an inevitable turnover (wrong); others feel the last thing they want to do is register for VAT; it’s just more admin and more tax.
Well maybe. However, it could mean significant extra profit for your business!
The VAT is a tax on consumers. If your business supplies consumers, you will want to delay registering for VAT until your turnover means you must register. (Note if you have taken over a ‘going concern that was already VAT registered-then, you must register from day one of your business.)
If your customers are other businesses or even if some of them are other businesses, then it could pay dividends to register for VAT immediately.
Charities and VAT registration
You must register for VAT with HM Revenue and Customs (HMRC) as a charity if your VAT taxable turnover exceeds £85,000. The threshold is for the turnover and not for profit.
For example, You can register if it is below this to reclaim VAT on your supplies.
If you registered for VAT, you must send a return every three months
Summary:
Those setting up a new business sometimes think they cannot register for VAT until they have reached an inevitable turnover (wrong); others feel the last thing they want to do is register for VAT, and it is just more admin and more tax, isn’t it?