You must register for VAT if your vatable turnover is more than the threshold (2017-18: £85,000). You may also want to consider registering voluntarily if your turnover is below the threshold in certain circumstances if this is beneficial to your business. Guidance from HMRC is given in VAT notice 700/1.
When to register
Even if you are not over the threshold you must perform checks every month and register if any of the following apply:
- Your vatable turnover is more than the VAT threshold in the previous 12 month period.
- You receive goods in the UK from the EU worth more than the VAT threshold is the previous 12 months.
- You expect to go over the threshold in a single 30 day period.
You must register within 30 days of your business turnover exceeding the threshold. For example, if at beginning of December you check your records for turnover from 1.12.16 to 30.11.17 and find you are over, then must register during December with registration date of 1.1.17.
If you register late, you must pay what you owe from when you should have registered. There may also be penalties charged.
When you register you will be sent a VAT registration certificate which will confirm:
- Your VAT number
- When to submit your first VAT Return and payment
- Your ‘effective date of registration’.
It is important to note that you can’t charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period. While you wait for your VAT number you should increase your prices to allow for the VAT and tell your customers why. Once you have got your VAT number you can then reissue the invoices showing the VAT.
Pre-registration expenses
Once registered you are able to claim back the VAT on purchases made before your registration date. However there is a time limit for backdating claims as follows:
- 4 years for goods, but you must still have the goods on hand at the point of registration.
- 6 months for services.
You can reclaim these on your first VAT Return,
Record keeping
To reclaim the input tax (VAT on purchases) you must have a valid VAT invoices to support your claim. You should keep invoices and receipts for a minimum of 6 years, although this is fine it these are kept electronically.
Deadlines
The deadline for submitting the return online and paying HMRC is 1 month and 7 days after the end of the VAT period. For example is you VAT period ends on 31 December 2015 the VAT return needs to be submitted and payment made by 7 February 2016.
De-registering from VAT
Once registered you can ask HMRC to cancel your registration if your vatable turnover falls below the de-registration threshold (2017/18: £83,000).
You must cancel your registration you stop trading or making VAT taxable supplies.