A Guide To VAT Registration For Your Online Business

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When a business reaches a particular size, they’re required by law to start out charging VAT on all their sales and pay this money to HMRC. Registering for VAT requires you to stay records and submit VAT returns, but it also enables you to say back VAT that you simply pay on purchases you create for your business. We take a glance at what VAT is, when and the way you’ll register, and the way you’ll reclaim VAT on business-related purchases.

What is VAT?
Value Added Tax may be a sort of consumption tax, charged on the sale of products and services within the UK. It’s charged as a percentage of the entire cost of an item or service, currently, VAT is 20% for many items. The VAT charged to a business’s customers is then paid to HMRC once you complete your VAT return, and you’ll reclaim VAT that you’ve paid on business related goods or services.

Some items and services charge VAT at a reduced rate of fifty , and a few are zero-rate VAT but these still need to be recorded in VAT accounts and included in your VAT returns. determine more about the various VAT rates.

When does one got to register for VAT?
You need to register for VAT with HMRC if your business’s VAT taxable turnover goes over £85,000 during a rolling 12 month period (the threshold usually increases on 1 April each year). However, if neither you or your business is predicated within the UK there’s no threshold and you want to register for VAT as soon as you supply any goods or services to the united kingdom . you’ll also voluntarily register for VAT before you reach the edge .

VAT taxable turnover is that the total value of everything you sell that isn’t exempt from VAT.

Once your business has passed the £85,000 threshold you want to register for VAT within 30 days. If you miss that deadline then you’ll need to pay the VAT that you simply owe from once you should have registered and, counting on what proportion you owe and the way late you register, you’ll even have to pay a penalty.

If your taxable turnover only goes over the edge temporarily then you’ll write to HMRC and apply for an ‘exception’ from paying VAT. To de-register for VAT your turnover has got to fall below £83,000, and to use for an ‘exception’ you’ve got to supply evidence that your business won’t re-evaluate that threshold within the next 12 months.

How does one claim back VAT?
If you or your company is VAT registered, and you pay VAT for goods or services that you simply purchase, then you’re ready to claim the VAT back from HMRC.

As a VAT registered company you would like to stay VAT accounts, then you’ll need to complete a VAT return, usually every three months. The VAT return tells HMRC the quantity of VAT that you simply have charged on what you sell, and the way much VAT you’ve got paid on purchases for your business.

If you’ve charged more VAT than you’ve paid, you’ve got to pay the difference to HMRC. If you’ve paid more VAT than you’ve charged, you’ll reclaim the difference from HMRC. You’ll got to submit a VAT return albeit you don’t owe any VAT or got to reclaim any.

Most accounting software that you simply could be using to stay your financial records will allow you to submit a VAT returns on to HMRC.

You can also claim back VAT for purchases made before you registered. you’ll reclaim VAT for goods purchased up to four years before registration as long as you continue to have them, or they were wont to make other goods that you simply still have, and you’ll reclaim VAT for services purchased up to 6 months before. you’ll only make backdated claims for goods or services that were specifically purchased for the business that’s now VAT registered, and you’ve got to possess the acceptable records to incorporate in your first VAT return.

How does one register for VAT?
To register for VAT you’ll got to provide HMRC with details about your business like trading name, incorporation details, commercial activity , turnover, bank details and get in touch with details.

Sole traders, Limited Companies and partnerships are ready to register for VAT online here. You’ll be ready to register for VAT and make a VAT online account (or Government Gateway account). you’ll also use an accountant (agent) to register and submit your VAT returns.

Once you’ve registered you ought to get a VAT registration certificate within 14 working days (but it can take longer) either to your VAT online account or by post if an accountant registers you otherwise you can’t register online.

Your registration date is that the date that you simply apply to register; referred to as your ‘effective date of registration’, and you’ll pay VAT from this date so it’s important that you simply keep VAT records from then.

Find out more about registering for VAT here.

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