VAT Registration

VAT (Value Added Tax) registration is the process by which businesses in the United Kingdom register for VAT with Her Majesty’s Revenue and Customs (HMRC) to become part of the VAT system. VAT registration is necessary for businesses that meet certain turnover thresholds or choose to register voluntarily.

At Cannytax, our qualified accountants provide professional advice and assistance with the complete VAT registration process. Need help? Call us 0203 002 2027.

7 Things to know about VAT registration

Here are some key points about VAT registration:

1. Thresholds for Compulsory VAT Registration
2. Voluntary VAT Registration
3. VAT Registration Process
4. VAT Obligations
5. VAT Returns
6. VAT Rates and Categories
7. Record-Keeping

1. Thresholds for Compulsory VAT Registration

Businesses are required to register for VAT if their VAT taxable turnover exceeds the current VAT registration threshold, which is set by the government. The threshold is subject to change and is currently £85,000 (as of 2023). If a business anticipates that its VAT taxable turnover will exceed this threshold within the next 30 days, it must register for VAT.

2. Voluntary VAT Registration

Even if a business’s turnover falls below the VAT registration threshold, it can still choose to register for VAT voluntarily. This can be advantageous for businesses that want to reclaim VAT on their purchases, enhance their credibility with customers, or conduct transactions with other VAT-registered businesses.

3. VAT Registration Process

Businesses can register for VAT online through HMRC’s online portal. During the registration process, the business will need to provide information about its trading activities, expected turnover, and other details. Once registered, the business will be assigned a VAT registration number.

4. VAT Obligations

After VAT registration, businesses become responsible for charging VAT on their taxable supplies and reporting and paying VAT to HMRC. VAT-registered businesses must issue VAT invoices to their customers, maintain accurate VAT records, and submit regular VAT returns.

5. VAT Returns

VAT-registered businesses are required to submit periodic VAT returns to HMRC. The VAT return summarizes the business’s VAT transactions for a specific period, typically quarterly, including VAT collected on sales (output VAT) and VAT paid on purchases (input VAT). The return calculates the net VAT due to or from HMRC.

6. VAT Rates and Categories

VAT-registered businesses must charge VAT on their taxable supplies at the appropriate VAT rates and categories. In the UK, there are several VAT rates, including the standard rate (currently 20%), reduced rates (5% for certain items), and zero rates (0% VAT).

7. Record-Keeping

VAT-registered businesses must maintain accurate VAT records, including sales invoices, purchase invoices, and other relevant documents. These records should be retained for a specific period, usually six years.

VAT registration is an important step for businesses to comply with tax regulations, collect and pay VAT correctly, and manage their VAT affairs. Businesses should understand the VAT rules and obligations, seek professional advice if needed, and ensure they meet their ongoing VAT reporting and payment obligations to HMRC.