VAT registration in the UK – summary
You must register for VAT as soon as either your business passes £85,000 in turnover or you predict that, within your company’s current financial year, you will pass that level of revenue.
Your Company Formations has helped thousands of businesses to successfully register VAT since we began trading. VAT is a complicated tax and many companies, when registering, make mistakes on their form which hold up the issuance of their VAT number.
For help and advice on VAT registration, please call us +44 (0) 207 689 7888 or email us at firstname.lastname@example.org.
VAT registration for small businesses – our service
Completion of VAT(VAT01) form for registration
Our experts will, in consultation with you, complete the VAT01 form so that your business can successfully apply for its VAT registration number. Once completed, we will email you the completed form to sign. After you have put your signature on the document, you can either post it back to us or scan and email it.
Submission of the VAT01 form to the correct department
There are two different HMRC offices handling different types of VAT registration based upon your company’s history and your personal history. To make sure you receive your VAT number as quickly as possible, we will submit the form to the relevant VAT registration office address.
Receipt of VAT number
You will receive your VAT number direct from HMRC. Around three quarters of all VAT numbers are received within 10 working days. At busier times, HMRC may take up to a month to provide you with your VAT number.
Application to join a specialist scheme
If, after consultation with our team or with your accountant, you decide that your business would benefit from joining either the Flat Rate Scheme, the Annual Accounting Scheme, or the Annual Accounting Scheme plus the Flat Rate Scheme to the correct office, we will make the necessary application on your behalf. Depending on your circumstances, you may need to sign and return a hard copy of the application form we fill in on your behalf.
Acknowledgement that you have joined an alternative scheme
You will receive notification direct from HMRC, normally within 10 working days, that your application to join either the Flat Rate Scheme, the Annual Accounting Scheme, or the Annual Accounting Scheme plus the Flat Rate Scheme to the correct office has been successful.
VAT registration for companies – frequently asked questions
Which types of business do you help to register for VAT?
We work with a wide variety of companies successfully obtain their VAT number however our main work is generally:
- VAT registration for new businesses
- VAT registration for online businesses
- VAT registration for small businesses
- VAT registration for sole traders
- VAT registration for sole traders with two businesses
How do I charge VAT?
Once you are registered for VAT, you must charge 20% on top of all the goods and services you supply to consumers and other businesses.Not all products attract 20% VAT – there are some products and services which attract a 5% rate and other which attract a zero rate.
When you make a sale, you have to put aside the VAT element in your bank account. For example, if you charge £100 for something and£20 (20%) VAT on top, this is VAT you’ve collected for HMRC. This is known as your output VAT.
Every time you buy something from a supplier which charges you VAT, the VAT part of your supplier’s invoice is your input VAT. At the end of your VAT period (normally every three months), you add up all the output VAT you’ve charged and then you subtract all the input VAT you’ve paid.You then either pay HMRC the difference or they pay you the difference.
You pay any VAT that you owe one month and seven days after the end of a VAT period. So, for example, if your VAT quarter ends on the 31st January, you must submit your VAT return and pay your VAT bill by 7th March.
Can I apply to join the VAT scheme if I do not believe I will turn over £85,000 in a year?
Yes. Not many businesses do however there are advantages to doing so which we cover in the next question.
What are the advantages of applying for VAT?
If you have been in business for a number of years and you register for VAT, you can claim back input VAT you’ve paid over the previous four years for goods which your business still uses and for the previous six months on any services.
If your business supplies zero-rated goods and services(meaning you don’t have to add VAT to your invoices), you can claim back the input VAT you pay each quarter.
Many VAT-registered businesses and public sector organisations prefer only to deal with VAT-registered suppliers. You will likely open up more commercial opportunities for your company if you have a VAT registration number.
What are the disadvantages of applying for VAT?
If you supply to consumers or non-VAT registered businesses, they will not be able to claim the VAT back on what they purchase from you. You will be at a disadvantage on price if you’re quoting against non-VAT-registered competitors for work.
With most VAT schemes, you have to pay once every quarter.Your VAT payment will often be equivalent to about 2-3 weeks’ turnover. You will have to factor for this in your cash flow planning.
What is flat rate VAT?
Flat rate VAT is a VAT scheme designed to make working out what you owe in VAT easier. Instead of calculating your VAT by subtracting all your input VAT from your output VAT, you keep aside a proportion of your VAT-inclusive turnover for your next bill.
For example, let’s say that you charge a customer £1,000 plus VAT (£1,200 inclusive) for your products or services. You then keep aside a proportion of that depending on what line of business you’re in (you can see that proportion here).If you are in advertising, your flat rate is 11% so you would keep 11% of the£1,200 aside for your next bill.
You can join the scheme if you turn over £150,000 or less. You can also claim back VAT on goods and services you buy for the business which cost £2,000 or more including VAT.
The scheme is not suitable for companies which spend less than 2% of their VAT-inclusive turnover on goods and services which they are charged VAT on by their supplier. If you spend more than 2% but the cash amount on the goods and services you buy in is less than £1,000 a year, Flat Rate VAT is also not suitable for you.
What is annual accounting VAT?
Instead of completing a VAT return once every quarter, the annual accounting VAT scheme allows you to submit one VAT return a year. You must turn over less than £1.35m to be part of this scheme. At the start of each year, you will be asked to estimate how much VAT you expect to pay or the figure you pay is based upon the previous year’s VAT amount.
You pay your VAT once a month for 9 months at 10% of the estimated annual bill over the course of the year or 3 payments once a quarter of 25%. The balance is then paid within two months of the end of month 12.
Annual accounting VAT makes cash flow management and budgeting much easier however if you outperform expectations, you may have to find extra cash to make the final balancing payment.
You must keep HMRC informed about whether you think your tax liability will be lower or higher than expected or than in the previous year.
Can Your Company Formations help me with my VAT?
Yes. Since we began trading, we have helped thousands of businesses register for VAT and our team is ready to answer any questions or concerns you have during and after the process.