All businesses in the UK are required to register for VAT when their turnover reaches certain limits set by the government. For the tax year 2015/16 this threshold is set at £82,000.
The current rate of VAT charged on most services and goods is set at 20%, although certain supplies are “zero rated” or “exempt”.
In the case of “zero rated” supplies you don’t charge output VAT but you can reclaim your input VAT suffered on both services and goods received, however if the supply is “exempt” then you don’t charge or claim back any VAT.
It may be advantageous to register for VAT if you sell mainly to VAT registered businesses even if you haven’t reached the VAT registration threshold.
To register for VAT you, or your accountant, would have to complete and sign a VAT 1 form and send to HMRC. The process usually takes between 6 – 8 weeks to complete.
All businesses must register for VAT once they reach the threshold in a year.
When you are fully registered for VAT you need to show your VAT registration number on all your invoices, you should always ask for a VAT invoice from your suppliers to claim back the VAT suffered on services or goods purchased.
Good record keeping is a must to complete your VAT return correctly. This is done once every quarter for as long as you are VAT registered.
There is one more thing that needs to be considered before registering for VAT and that’s what VAT scheme would suit your business most. We will be discussing different VAT schemes in next blogs. Click here to read.
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