Value Added Tax (VAT) is not just the by-product of a successful business. However, it can apply to any business that has big ambitions for future growth. At present the VAT threshold is £79,000, and if you are raking in profits above this sum in a rolling calendar month you MUST register for VAT with HMRC regardless. However, you don´t have to wait until you meet HMRC threshold to register for VAT if you plan to expand – and doing so can bring early benefits to your business.
Some start-ups register for VAT on day one. The presents the immediate benefit that your company is set up to stand the test of time and encourages confidence in suppliers, contractors and clients. Businesses that sell merchandise are already subjected to VAT whether or not you are hitting the maximum turnover or not as everything you sell is subject to VAT which automatically goes directly to HMRC.
The exception here is if you sell products or services on a B2B basis. If you have registered to pay VAT then you must add 20 per cent to the bill to cover your profit margins. If you have not registered for VAT there is no reason for it to be included on the invoice as no VAT is payable in the transaction. If your supplier charges VAT you have to be registered to claim this back otherwise you pay 20 per cent extra on the invoice for nothing. If you are VAT registered from the outset you might even be entitled to a little VAT refund from the tax man when you file your self assessment tax form.
How to register for VAT
Registering for VAT is fairly straight forward and can be done either online or in writing to HMRC. Before you register you will need the following details:
- National insurance number
- Certificate of incorporation
- Business bank account details
- Whether any parts of your business has been transferred
- Details of associated businesses within the last 2 years
Registering online is the quickest and easiest way to register for VAT with HMRC. Anybody can use this method unless you trade internationally, your business is part of a global group. The other exception is if you a registering a partnership. Although you can register online, you are also required to submit a VAT2 paper form stating who the partners are. When HMRC incorporate this information into their system the rules may change, but at the time of writing partnerships must send in a paper registration.
The other option open to you is to send a paper registration form VAT1. You can download the VAT1 form straight from the HMRC website. Before you can register for VAT online however, you firstly have to register your business using HMRC´s online form after which you will receive a unique tax registration number which you need to log into your account. HMRC will confirm you have been successfully registered for VAT by sending you a VAT4 certificate.
How to submit VAT to HMRC
In April 2012, HMRC reverted to a paperless office in an attempt to speed up tax processes. VAT falls under one of the claim types the tax agency wanted to expedite. Therefore, businesses that have registered for VAT have to submit their VAT returns and payments electronically.
If your budget allows it, hiring an accountant can save you a lot of time and money in the long run. Taxaccolega, a low fixed fee London accountant, offers sound advice about VAT registration and will remove the burden of you having to deal with HMRC yourself. To find out more about registering for VAT and the other accountancy services we offer call us today on 08000 235 234 or email firstname.lastname@example.org