Recent research has revealed that a third of the UK’s smallest businesses are unaware of the rules governing VAT thresholds. A blog on this topic would therefore seem timely.
So what are the key issues:
When must I register?
You must register for VAT (2015 figures) if:
- your VAT taxable turnover is more than £82,000 (the ‘threshold’) in a 12 month period
- you receive goods in the UK from the EU worth more than £82,000
- you expect to go over the threshold in a single 30 day period
For example, if on 10 May as a result of a large order, you expect your turnover to exceed the threshold in the next 30 days alone, you must notify HMRC by 10 June; and your VAT registration date will be 10 May.
You may also have to register for VAT if you take over a business that is already VAT registered.
You may be able to gain an exception from registration if your turnover goes above the threshold temporarily.
You must register within 30 days of your business turnover exceeding the threshold. It is important to monitor turnover, as there is a penalty for late registration in addition to the tax payable.
Can I register voluntarily?
Definitely. It may be in your business interests to register even if your turnover is below £82,000.
How do I calculate my VAT taxable turnover?
The VAT taxable turnover is the total value of your Sales that is not exempt from VAT. This should include goods used personally, good hired or loaned to customers or goods given as gifts. It is also important to note that if you operate two separate business as a sole trader, you will need to consider the combined turnover of both to assess if the threshold has been reached?
Can I include Purchases made before Registration?
Yes but they are subject to the following time limits:
- 4 years for goods you still have (or that were used to make other goods you still have)
- 6 months for services
They must relate to the business now registered and to the VAT taxable good or services that you supply. They should be claimed on your first VAT return (add them to the Box 4 figure) and you should keep records.