VAT registration is only compulsory once your taxable turnover is over the VAT registration threshold (which is currently £77,000). But if your turnover is under this, you may register voluntarily.
Once you register for VAT, in general, you can recover the VAT on your business expenses- they were incurred prior to you actually applying for your VAT registration. But, you also have to charge VAT on your sales to your customers.
Voluntary VAT registration can be advantageous, but it depends on the circumstances. The main consideration is who your customers are:
- If they are the general public, they cannot recover the VAT you charge them. Therefore, the VAT will effectively increase your prices and make you less competitive.
- If they are other VAT-registered businesses, then they will be able to recover the VAT you charge them. Therefore, they are neither better nor worse off if you register for VAT.
There are many things to consider to decide if VAT registration is suitable. And it’s important to get your tax affairs right, to avoid overpaying tax or losing customers. So please feel free to contact your local TaxAssist Accountant if you would like to discuss this further.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.