Should your business become VAT Registered?
By UK law you must register your business for VAT with HMRC if your VAT taxable turnover is more than £85,000. However, are their other reasons why you would register before reaching this threshold? And what are the positive and negative impacts of this decision?
To keep things simple, we have pulled together this short article to help you decide if registering your business for VAT is the right option for your business.
Positives of registering for VAT
You are able to reclaim any VAT that you are charged when you pay for goods and services related to your business. Office supplies, furnishings, travel expenses, and fuel are just a few items that VAT can be claimed back on.
You’re ready for growth
By registering for VAT you don’t have to keep an eye out for the threshold and any unexpected bills dropping on your doorstep. If your business is growing quickly and you expect to easily hit this threshold in the current financial year it’s better to do this sooner rather than later.
If you’re a business-to-business (B2B) organisation that wants to trade with larger business owners, potential clients policies might dismiss the use of suppliers that aren’t VAT registered.
Negatives of Registering for VAT
You could end up paying more to HMRC – If your ‘output tax’ is more than your ‘input tax’
If you have not allocated your VAT Return to an accountancy firm you will need to file this yourself. There is good accounting software that can help with this, but if accounts are not your thing, you could spend allot more time than you want to on this.
Higher Prices for Your Customers
You may have to pass on higher prices to your customers, especially if you typically deal with the general public and not VAT registered businesses (who can claim back their VAT).
Missed deadlines could lead to fines
If you end up submitting your VAT Return late or are late with a payments additional charges are likely to apply. If you’re concerned with this, getting support from a professional accountancy service could help put your mind at rest.
Important – If you are below the VAT threshold and are thinking about registering please talk to your accountant (hopefully that’s us) or a financial specialist before doing so to help ensure you are making the right call.