Should I be VAT registered?
5th August 2014
There are a number of questions that we are asked on a regular basis so we decided to do a series of blogs covering our frequently asked questions. VAT is a complicated subject matter but the first step is knowing if you should be registered.
Firstly, you do not have to register for VAT until your turnover passes the registration threshold (currently £81,000).
Many businesses choose to register early and there are a couple of reasons for doing this:
1) You sell zero rated products – if this is the case then although you don’t charge your customers VAT you can still reclaim it on your purchases, generally meaning you will get VAT refunds!
2) You work with big companies – if all your customers are VAT registered then charging them VAT won’t be an issue (unless they are charities or insurance companies) and this means you can reclaim VAT on your expenses.
3) Appearances – it might be that you want to portray your business as a bit bigger than a start up and not being VAT registered would be an indication that you are small.
Things to consider before VAT registration
1) Do you have customers who are not VAT registered? – If this is the case then adding VAT will increase the cost of your products or services by 20%
2) Can you pass on the VAT cost to your customers? – Businesses such as cafés and hairdressers may not be able to simply increase prices by 20% overnight without losing valuable customers.
If you do not register for VAT immediately it’s very important to keep an eye on your turnover, the threshold for VAT is based on a rolling 12 month period so if you go over in any 12 months (not just your accounting year) you are required to register. To be on the safe side, speak to your accountant if your monthly turnover goes over £6,500.
If you have any questions why not contact us and have a chat about how we can help you get the administrative stuff under control and focus on your business growth.