VAT Registration Limits – When is it Compulsory?

After you have incorporated your limited company, there are a number of tax points to consider which include dealing with VAT.   VAT registration may be compulsory or voluntary, depending on the level of a business’s current or future turnover.  A company can only be registered if it is either currently making taxable supplies (sales where VAT would apply) or intends to make taxable supplies in the future.

Assuming this is the case, it is then necessary to decide whether registration will be compulsory or not, and if not, whether there could be benefits from registering on a voluntary basis.

Compulsory VAT Registration

There are two cases when a business must register and charge VAT.  These are:

  • Where a non-registered business makes taxable supplies whose value exceeds £68,000 within the last twelve months or a shorter historical period.
  • Where there are reasonable grounds to expect the value of taxable supplies to exceed £68,000 within the next 30 days alone.

If you believe either of these applies, you will need to act quickly.  There are strict time limits to complete your application and there are penalties for late registration.  If you are unsure of your position, you should consider taking advice from an accountant or tax adviser.

Voluntary VAT Registration

If you do not have to compulsorily register for VAT there are reasons why you may want to register voluntarily.  Often many small companies wish to portray that they are larger entities or to demonstrate that they are compliant with the tax authorities.  VAT registration is one way of doing this.

Sometimes a business will register where all of their customers are VAT registered.  As a result, the total net price to the customer will not change, however the business will be able to reclaim the VAT suffered on its inputs.

Rules regarding VAT registration can be complex. If you are unsure whether you should or need to register you should always seek professional advice.

For more information about VAT and taxes visit Wisteria Chartered Accountants VAT webpage.