Why you should register your business for VAT
In this article we would like to dissipate doubt of all of those who do not know whether they should register their business for VAT or not. Some people consider it beneficial option, the other claim that such step only generates high cots. How is it in reality? What you should know about VAT registration? First of all, we should say when you have no choice, and simply you are obliged to do it. You have to register your business for VAT if your turnover in the last 12 months exceeds threshold set by HMRC (Her Majesty’s Revenue and Customs). There should be added that this 12-month period is neither the financial year, nor the calendar year. It is an immediate preceding 12 month prior to today’s date the current level. Threshold level set by HMRC is more than £83,000. If you exceeded threshold, it means that you have to charge your customers VAT on top of the price at 20% (it is 20% more than you usually charge them). However, you can reclaim your VAT on the stuff that you buy on your purchases. You just pay net amount of the products. Let us focus on situation in which your turnover does not exceed the threshold. Some of you probably ask yourself whether you should register your business voluntarily or not. The answer is that this decision on the type of business you are running. If you are the owner of the business to business type, for example, you work as consultant, web designer or commercial tradesmen, clients you serve probably are also registered. Probably, the fact that you will charge them additional 20% will not be any problem for them, because they can claim “this 20%” back. This option can be profitable for you. However, the type of your business is to customer, for instance, café, restaurant, and then registration might not be a good idea. The customers might be not really happy that you increase the prices of your services by 20%. Probably most of them are not entitled to claim it back. However, if you have to register your business, keep in mind several very important things. First of all, use only cash accounting. Thanks to this, you will not be charged additional 20%, until your customers pay you. Secondly, always get the proper, professional advice which will be in compliant with the interests of your business. Thirdly, remember to register your business, pay VAT, or reclaim your VAT at the proper time. For being late in paying any of those issues, you can be charged penalty. Moreover, consider using a scheme such an annual accounting or flat rate. The flat rate is very popular option among small businesses. As a summary, we can say that the decision related to the VAT registration depends on several factors: your turnover and type of your business and clients you serve. In case of any doubts, and in order to get more detailed information, you can also ask for help office assistants of HMRC.