Do you need to register for VAT?

If your turnover for the last 12 months reaches the VAT Registration threshold, currently set at £85,000, it is likely you will have to register for VAT.  There are other scenarios whereby you may have to register for VAT, for example if you expect your turnover to exceed the registration threshold in the next 30 days alone or if you are taking over a business as a going concern.  You may also apply for voluntary registration if you meet certain criteria.

Once you have applied to register for VAT you must account for VAT from the date you detailed in your application.  In the period between registering for VAT and receiving your VAT number you should increase your prices by an amount equivalent to the VAT you will be charging in order to avoid reducing your net income.  You should then explain to your customers the situation and that a proper VAT invoice detailing your new VAT number and the amount of VAT charged will be provided once you have received the VAT number from HM Revenue & Customs.

You may also want to consider if an alternative VAT scheme may be better for your business than the standard VAT accounting system.  Other schemes include the Cash Accounting Scheme, Annual Accounting Scheme, Flat Rate Scheme, VAT Retail Schemes and VAT Margin Schemes.

These schemes will be discussed in more detail next time but if you have any questions in the meantime please do not hesitate to contact me.