By Sam Bacall, Partner

Businesses that meet certain trading and turnover requirements must pay Value Added Tax (VAT) to HM Revenue & Customs (HMRC).

However, it can be difficult to know the exact rules and requirements for when a business needs to register for VAT, particularly for new business owners.

Here’s what you need to know about registering your business for VAT.

Who needs to register for VAT?

The current VAT threshold stands at £90,000.

If your business has reached the current VAT taxable turnover threshold of £90,000 in the past 12 months, or you expect turnover to be in excess of £90,000 in the next 30 days, you must register for VAT.

The only UK businesses that do not have to register for VAT are those selling VAT exempt or “out of scope” goods and services.

When you should be registered for VAT is down to the date at which you expect to/have reached the threshold.

Businesses that do not register for VAT when their turnover grows beyond the threshold could be faced with a large fine from HMRC.

You must also register (regardless of taxable turnover) if all of the following are true:

• You’re based outside the UK.
• Your business is based outside the UK.
• You supply any goods or services to the UK (or expect to in the next 30 days).

How do I calculate my turnover?

Taxable turnover is classed at the total value of everything your business sells that is not exempt from VAT including:

• Goods hired or loaned to customers.
• Zero-rated goods.
• Business goods used for personal use.
• Bartered or part-exchanged goods.
• Goods given as gifts.
• Services you received from businesses in other countries that you had to “reverse charge.”
• Goods and services which are subject to the “domestic reverse charge.”

How do I register for VAT?

Registering for VAT is relatively straightforward.

The two main ways to register for VAT are as follows:

• Register online using a Government Gateway ID.
• Fill out a paper VAT1 form.

You’ll need the following to hand when you register:

• Business contact details.
• Details of your turnover and the nature of the business.
• Bank account details.
• Unique Tax Reference (UTR) number.

Which VAT Scheme should I choose?

VAT Schemes are designed to give businesses a bit of breathing room when it comes to paying their VAT.

These schemes also cover the various situations unique to each business in terms of turnover. This is usually in line with the nature of the business.

There are many categories of VAT you need to consider before registering.

For example, with the Annual Accounting VAT Scheme, you’ll make advance payments on VAT towards the current year’s VAT based on your previous return or an estimation.

What if my turnover only goes over the threshold temporarily?

If your taxable turnover goes over the threshold temporarily, you can apply to HMRC for a registration “exception”.

HMRC will consider your exception and write to confirm if you get one.

If not, you will be registered for VAT.

VAT advice with FFT

For any small business owner, understanding your VAT obligations is essential.

At FFT, we can help you calculate your turnover, establish whether or not you need to register for VAT, and make sure you register your business under the right VAT scheme.

The costs of not registering are high – so get it right from the start with FFT.

Contact our tax specialists today for advice and guidance on registering for VAT.