Do you need to register for VAT?

When should you register for VAT?

In the UK, you must register your business for VAT if your VAT taxable turnover exceeds £85,000. Once registered, you will receive your VAT certificate.

Your taxable turnover is the total of everything sold that is not VAT exempt.

You must register if:

You expect your VAT turnover to be more than £85,000 in the next 30 day period
Your business had a VAT taxable turnover of more than £85,000 over the last 12 months

Exceptions and exemptions

There are a couple of exceptions to this rule especially for e-commerce businesses.

If you are operating under a ‘dropshipping’ business model, you must register for VAT regardless of if you have hit the threshold or not.

If the majority of your sales are zero-rated for VAT, you can apply to HMRC for exemption from being registered.

What if you exceed the threshold?

If you’ll exceed the VAT threshold in the next 30 days – You have to register by the end of that 30 day period. Your effective date of registration is the date you realised, not the date your turnover exceeded the threshold.

If you exceeded the threshold in the past 12 months – you have to register within 30 days of the end of the month that you went over the threshold. Your effective date of registration is the first day of the second month after you exceed the threshold.

Voluntary registration

register for vat You can register voluntarily if your business turnover is below £85,000. You must pay any VAT you owe from the date of registration.

There are occasions when voluntary registering for VAT could benefit your business. For example:

Claim back VAT on purchases of goods
The business could appear to be bigger as it could be assumed that you’ve already hit the £85,000 turnover threshold
Charging VAT on sales makes your price seem more competitive to VAT registered businesses

However, it’s worth considering:

If your output tax is more than your input tax then you will pay more to HMRC.
More time spent on paperwork with filing VAT returns
Having to typically increase your prices for non VAT registered customers to include VAT.

Brexit VAT changes

For changes in VAT due to Brexit – Please see our Brexit blog post here

Need further help?

Evenstone are specialist e-commerce accountants – We’re here to help you decide if VAT registration is right for you and if so, which scheme is best.