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VAT

A real positive of being VAT registered is that you can claim back VAT paid on purchases of goods or services.

  1. Business Accounting

The biggest advantage of getting VAT (Value Added Tax) registered is that you can claim back VAT paid on purchases of goods or services. This includes the VAT you paid when purchasing goods or services when you were setting up your business. Usually, companies spend a lot of money on equipment and services when setting up their operations or when they are expanding. You can claim the VAT you pay during that time when you submit your VAT returns after getting registered with HMRC. 

You don’t have to be VAT registered (well, not until you reach revenues of £85k) but if your business is doing well and likely to hit this figure – you can voluntarily register for VAT with HMRC. This adds a proverbial vote of confidence to your business as a business that displays a VAT number appears like a big corporation which might make your business more attractive to potential customers.

Of course, there is a bit of paperwork involved. The VAT registration process, VAT calculations, filing VAT returns and claiming the VAT you have paid can involve quite a bit of paperwork. Given that VAT returns have to be filed every three months, you can't have this extra burden while managing your business. Lawrence Grant are VAT specialist accountants that can help you with all manner of VAT-related queries.

Please get in touch to explore your options and to help us understand how we can help you.

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FAQs

    How does VAT work?

    VAT is a tax applied to the sale of most goods and services by the government. The most common rate of VAT is 20% which is called the standard rate. Vendors charge this tax on the goods and services they sell and they pay VAT when they purchase goods and services. The difference is then paid to the HMRC and it can even be returned to the vendor if the amount they paid in VAT is less than the amount they received as VAT.

    At what revenue does VAT registration become mandatory?

    Your business must register for VAT if over the past 12 months your taxable supplies have exceeded the VAT registration threshold.

    For 2021/22 the threshold is £85000.It’s calculated on a rolling 12 months period, not just in the current tax year, your last financial year or the calendar year. If the total of your turnover over the last 12 months exceeds £85000 at any point, you’ll need to register for VAT.

    Can you register for VAT before you reach the revenue threshold?

    Yes, you can voluntarily register for VAT with HMRC at any time. The main advantage of getting registered for VAT voluntarily is that you can claim the VAT you paid while making initial business expenses such as buying equipment. 

    How many times do we have to file VAT returns?

    In most cases, you have to submit your VAT returns to HMRC once every three months. That means, on average, you have to submit four VAT returns every year.

    What do I need to claim back the VAT I paid?

    You need a VAT receipt to claim VAT. This receipt will have the name of the vendor, their address, as well as their VAT number. HMRC will use this information to process your VAT claim.

    Can I deregister for the VAT if my revenue drops below the threshold?

    Yes, but the revenue threshold for deregistering is £83,000. This means that even if your revenue stays between £85,000 and £83,000, you will still need to charge VAT from your customers. However, if your revenue falls below £83,000, you can ask HMRC to deregister your business.

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