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When to register for VAT – a small business guide

6-minute read

Catriona Smith

15 March 2022

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When should businesses go through VAT registration? Our guide answers the most common questions about VAT – from the VAT threshold to when to register – and also points you towards official government guidelines.

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What is VAT?

VAT stands for Value Added Tax, which is a type of tax on the consumption of goods and services. Businesses pay VAT on purchases and charge customers VAT.

How to get VAT registered: initial steps

In the UK, you need to register your business for VAT if your VAT taxable turnover exceeds £85,000. Your VAT taxable turnover is the total value of everything you sell that’s not exempt from VAT (exemptions include lottery ticket sales, postage stamps or services, and certain financial services – but VAT is applicable in some form to most goods and services).

You can work out your VAT taxable turnover using the UK government’s calculation guide.

Once you’ve registered, HMRC will send you a VAT registration certificate, confirming your:

  • VAT number
  • first VAT return (and payment) details
  • effective date of VAT registration

You can’t charge or show VAT on invoices until you know your VAT number, but you may still need to pay VAT for this period. The UK government website recommends increasing your prices to allow for this. Explain what’s happening to your customers, and plan to reissue the invoices showing VAT once you have your VAT number.

From your effective date of registration, you’ll need to:

  • charge VAT correctly
  • pay any VAT that’s due
  • submit VAT returns
  • keep VAT records and use a VAT account
  • follow HMRC’s Making Tax Digital for VAT rules (in most cases)

Read our guide to Making Tax Digital for more help on this important topic.

There’s also our Self Assessment and tax hub resource hub, if you need more general information on tax.

Why should I register for VAT?

If your turnover is above £85,000 then you need to register by law, but you can also go for voluntary VAT registration.

Registering for VAT lets you reclaim VAT on your purchases. If you pay more VAT than you collect from customers, reclaiming VAT makes up the difference.

It also means you’re ready for growth because you won’t need to keep an eye on your turnover.

On the other hand, VAT registration means more paperwork, and sometimes you’ll pay more to HMRC (if you collect more VAT from customers than you pay out). It’s best to look at the specifics of your business when deciding whether to register for VAT.

How to register for VAT

The easiest way is to register online, using your business tax account. Register for VAT online at the UK government’s VAT registration hub.

An agent (for example, an accountant or tax adviser) can also register your business and deal with HMRC for you.

VAT registration by post

Some businesses can’t register online and will need to download a VAT1 form and send it by post. This can include businesses that are:

  • applying for a registration exemption
  • joining the Agricultural Flat Rate Scheme
  • using separate VAT numbers to register different parts of the business

You might need to complete an additional form, depending on your business – visit the government’s how to register page for guidance on which one applies.

What is a VAT certificate?

A VAT certificate in the UK is a document that HMRC will send you to prove that your business is registered for VAT. As mentioned earlier, it shows your VAT number, the date you need to submit your first VAT return and pay your bill, as well as the ‘effective date of registration’.

When will I get a VAT registration certificate?

Your VAT registration certificate should arrive within 30 working days, but this can take longer. Remember to check your online account as it'll usually be sent there, unless an agent is handling things for you or you’ve registered by post.

How to get a VAT number

Your VAT number will be on your VAT registration certificate and this number has to go on invoices you send out.

How to check if a company is VAT registered

You can find out if you’re working with a VAT registered company by checking the invoices you’ve been sent. Their VAT number should be on there – if it’s not, the invoice will be invalid, meaning you can’t reclaim VAT. You should get in touch with the business straight away.

You can check that a VAT number is valid by calling HMRC’s VAT helpline on 0300 200 3700.

If you’re checking an EU business, you can use the European Union’s VAT Information Exchange System (VIES).

What is the VAT threshold 2022?

The VAT threshold is the VAT taxable turnover figure mentioned earlier. If your turnover goes over £85,000, or you know it will, you must register for VAT.

Some businesses will also need to register when selling particular goods or services, and in certain locations or markets, for example Northern Ireland and the EU. Read more about when to register.

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When to register for VAT

VAT registration becomes compulsory when:

  • you expect your VAT taxable turnover to go over £85,000 in the next 30-day period
  • your business had a VAT taxable turnover exceeding £85,000 over the last 12 months

Remember, these are calculated on a rolling basis, so it’s not enough to review your taxes once a year and register if your income has exceeded the threshold. You’ll need to keep a regular check on your rolling 30-day and 12-month periods and register on time.

Exceeding the VAT threshold in the next 30 days

If you think your total VAT taxable turnover will go over £85,000 in the next 30-day period, you’ll need to register. You must do this by the end of that 30-day period, because the effective date of registration is the date you realised (not the date you go over the threshold).

VAT 30-day rule example

Your business has a typical monthly turnover (all VAT taxable) of £4,000. With some last-minute scaling up, you’ve unexpectedly secured a single contract for £88,000. This will take you over the £85,000 VAT threshold during the next 30 days.

You realised that you’ll exceed the threshold on 1 March 2022, which means you’ll need to register for VAT by 30 March 2022, and your effective date of registration will be 1 March 2022.

Exceeding the threshold in the past 12 months

If your total VAT taxable turnover for the last 12 months was over £85,000, you’ll need to register. You can check this at the end of every month, but you must register within 30 days of the end of the month you went over the threshold.

Your effective date of registration will be the first day of the second month after you go over the threshold.

VAT 12-month rule example

Although your typical 12-month turnover is £70,000, 2021 was busy due to a spike in demand for your product. Looking at the period 28 February 2021 to 27 February 2022, you can see your VAT taxable turnover will go over £90,000, taking you over the £85,000 VAT threshold for that 12 months.

This means you’ll need to register for VAT by 30 March 2022, and your effective date of registration will be 1 April 2022.

Taking over a business

If you’re taking over a business, check its VAT registration status as early as you can. You may need to register for VAT, even if it’s already registered.

Businesses outside of the UK

Thresholds don’t apply to businesses outside the UK. You’ll need to register as soon as you supply goods and services to the UK, or if you expect to in the next 30 days.

Late VAT registration

If you register late, you’ll need to pay the VAT owed from the date you should have registered. You may also get a penalty.

Can I get a VAT exception?

If you know you’re only going to breach the threshold temporarily, you can apply for an exception. You’ll need to show evidence why you believe your VAT taxable turnover won’t exceed the deregistration threshold of £83,000 in the next 12 months.

You can write to HMRC using this address:

HM Revenue and Customs – VAT Registration Service, Imperial House, 77 Victoria Street, Grimsby, DN31 1DB, United Kingdom.

If they agree with your application, HMRC will confirm this with you in writing. If not, they’ll register you for VAT.

What if I supply digital services?

The rules on paying VAT when supplying digital services to EU countries changed on 1 January 2021 (the end of the Brexit transition period). These services include broadcasting, ebooks, telecomms, video, music downloads, games, apps, and software.

There used to be a £8,818 threshold, so if your sales went over this amount you had to register in each country where you were supplying digital services or sign up for VAT MOSS.

Now there’s no threshold, so you have to charge VAT at the right rate for where your customer is based and declare those sales to the appropriate country.

You can no longer use the UK’s VAT MOSS scheme for sales made from 1 January 2021. You can only use VAT MOSS to make corrections to registration information until 31 December 2024.

You’ll need to register for the EU VAT MOSS non-union scheme in a member state, or register in each EU state you make sales.

Read more about supplying digital services to customers.

Cancelling, changing, or transferring VAT registration

The UK government website is your starting point for managing any changes to your VAT registration:

Changing VAT address (or any other details)

Visit the government’s changes to your details page to edit your address, name, accountant information, bank details, or anything else connected with your VAT registration.

You should also use this page if taking on responsibilities for someone who has died or is ill.

Cancelling VAT registration

In some situations, you must cancel your VAT registration by a certain date. You can cancel VAT registration online.

Transferring VAT registration

You might want to transfer a VAT registration from one business to another, or if the status of your business changes (for example from partnership to sole trader).

Visit the government’s page on how to transfer a VAT registration to understand the process from start to finish.

How does VAT affect your business? Let us know in the comments.

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