If you’re a business buying or selling in the United Kingdom, you have likely paid or received VAT (Value Added Tax). This is a tax that is levied on most products and services sold in the United Kingdom. Unless you’ve registered with HMRC to do so, you don’t charge VAT to your consumers when you make sales. As a business, you may be required to register for VAT by HMRC for any number of reasons and you may equally do this for due diligence. In this article, we will look at how to register for VAT and seven tips to remember during and after the process of registering for your VAT number.
As an entrepreneur or business, it is important to have all the necessary information to make the right decision about tax compliance. This article is useful for businesses and entrepreneurs that are looking for a fool-proof way to think about their taxes.
TABLE OF CONTENTS:
How to Register
Most enterprises, including partnerships and groups of corporations filing under one VAT number, can register online. You’ll be able to register for VAT and create a VAT online account (also known as a “Government Gateway account”) by doing so. This is required to submit VAT returns to Her Majesty’s Revenue and Customs (HMRC).
Using an Agent
You can hire an accountant (or agent) to handle your VAT returns and dealings with HMRC. You can sign up for a VAT online account (choose option ‘VAT submit returns’) once you have your VAT number from HMRC.
When you Cannot Register Online
You are required to apply for VAT via post if:
Getting your Certificate
After applying, your VAT registration certificate should arrive within 30 working days, but it may take longer. It will be sent to your VAT online account, which you may access from anywhere, or by mail if you’re registered using an agent or can’t register online.
Seven Super Tips for VAT Application
1). Only Apply if Required
If your yearly taxable sales exceed £85,000, or if they are expected to exceed that threshold in the next 30 days, you must register for a VAT number. This is referred to as mandatory registration. You may want to register before you meet the criteria in some circumstances. This is known as voluntary registration, and it can benefit your cash flow by allowing your company to receive input VAT back on its expenses.
2). What is the Quickest way to Apply for VAT?
The majority of people do their VAT registration online. If HMRC approves your registration application, they will issue you a certificate that includes your company’s unique VAT reference number.
3). Reclaim some of the VAT you’re Charged on Goods and Services
Your company will also be entitled to reclaim a portion of the VAT charged by its suppliers. Keep in mind that you won’t be able to reclaim VAT on some purchases, such as entertaining anyone other than employees. Input VAT refers to VAT that can be reclaimed.
4). Managing the Transition
When you request to be registered for VAT as of a given date, there will almost always be a gap between that date you applied and the delivery of your certificate and VAT registration number. You’ll have to charge output VAT on any sales made after your registration date, but you won’t be able to issue official VAT invoices until your VAT registration number comes.
5). HMRC will ask you for Access Codes
Businesses and organizations that utilize HMRC services will soon be asked to sign in using an access code. If you have not yet received access codes, you can learn more about the upcoming changes here. Your Government Gateway user ID and password should not be shared with anyone else.
6). Remember the VAT Flat Rate Scheme
The difference between the VAT a business charges customers and the VAT a business pays on its purchases is usually the amount of VAT a business pays or claims back from HM Revenue and Customs (HMRC).
7). Reclaim VAT on items that cost more than £2000.
The flat rate scheme allows you to pay a fixed VAT rate to HMRC and you can only reclaim VAT on certain capital assets over £2000. For start-ups this means that laptops and office equipment could be exempt from tax even if this might not be explicitly stated in the budget.
If you are subject to double tax, it is important to apply for a tax certificate of residence in the UK. The process of applying for a tax certificate is different for businesses, individuals and partnerships. This article shows you exactly how to apply for the tax certificates as well as what information may be required of you.
If you want to get advice on whether or not you may be suitable for a flat rate, be sure to talk to an accountant or tax advisor. Remember that to join the scheme, your VAT turnover must be £150,000 or less, excluding VAT.
New enterprises that have not yet filed a tax return must provide HMRC with the names and addresses of all directors and shareholders. As a new corporation, you must explain why you feel your company is based in the United Kingdom.
If you’re an EU business entity selling to Northern Ireland, use the VAT1A. Meanwhile, you should use the VAT1B form if you import goods from Northern Ireland above £85,000.