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Does my business need to be VAT registered?

Does my company need to be VAT registered?

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Most of us know VAT as that annoying extra 20% we have to pay on top of certain purchased goods or the amount we will try and work out when we see an item that states ‘excluding VAT’; but if you are a business owner, Value Added Tax can take on a whole new meaning – is it compulsory? Can I be VAT registered? What are the benefits? How will it affect my business?

When to become VAT registered

If you are either an individual, a company, a club, a charity, an association, a trust, a partnership, Local Authority or any group of people acting together under a particular name, you can register for VAT. Compulsory VAT registration is required if your business turnover exceeds £77,000 over a consecutive period, although this threshold tends to increase year by year. If you take over a business that is already registered for VAT then you too will be required to register as well. If you are trading outside the UK, then it is also compulsory and failure to register on time may incur penalties for late registration or ‘failure to notify’ charges.

Voluntarily register

Even if your turnover does not exceed the threshold, you may voluntarily register for VAT. The advantages of this being that if your customers are also VAT registered, the VAT they charge you, can be recovered. Also businesses can be better off registered as they may be entitled to certain refunds from HMRC.  You can not register for VAT if you business doesn’t meet the required definition of a business for VAT purposes, as set out by HMRC, or if you are only selling goods or services that are exempt for VAT.

does my business need to be vat registered

Consider your customer if you are planning on voluntarily registering. For example if you are trading with other VAT registered companies, they will be entitled to claim back the VAT paid and it will make no difference to them if you are registered or not. However, if your consumer market is the general public, then they won’t be able to cover the VAT. As a result, retail pricing inflates and your customers will be paying an additional 20%. If your competitors are not VAT registered, this could result in you being priced out of the market or being forced to slash prices and profits to keep you in the game.

Your annual turnover and your consumer market will ultimately decide if you will be required to register for VAT or if you are better off voluntarily registering, so if you are going into business, be armed with the facts and figures to enable you to make an informed decision and get the most out of your business.

The Working Parent VAT Calculator

Check out our really easy to use VAT calculator, calculate the VAT due on any amount and see a breakdown of the amounts.



About Rebecca Robinson

About Rebecca Robinson

After spending the last 8 years juggling life as a mum of two, wife and working full time as a Project Manager for a global telecommunications company, Rebecca Robinson made the decision to follow her love of writing and took the plunge; turning her passion into a full time career. Since becoming a full time writer, Rebecca has worked with various media and copy-writing companies and with the ability to make any topic relevant and interesting to the reader, now contributes to The Working Parent on articles ranging from credit cards to teenage relationships. Ever the optimist, Rebecca's dreams for the future include a house in the country filled with children, dogs and horses in the field!

Website: Rebecca Robinson

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