When do I need to register?
The current VAT threshold is £85,000 (18/19) and it is set to remain the same until at least April 1st 2022. This means that if within any 12-month period your earnings reach £85000 you need to register for VAT. This 12-month period is not necessarily your business’ financial year, it is a rolling total.
It is advisable that if your monthly turnover is over £6500 that you check your data for the past 12 months and look at your whole turnover figure, and keep a running total so you can see when you cross the threshold.
Do consider your registration, if the bulk of your purchases do not come from VAT registered sources then you may be better off signing up to the VAT flat rate scheme. There is more information about the flat rate scheme here: https://www.gov.uk/vat-flat-rate-scheme.
How do I register?
You will need to visit the HMRC website here: https://www.gov.uk/vat-registration/how-to-register. You can do this yourself or you can ask your accountant or bookkeeper to do this for you. You will receive a VAT certificate within 30 days of registering.
You can reclaim VAT on business expenses leading up to your registration. What you can reclaim is as follows:
- VAT on services that have been paid for within 6 months prior to your registration
- Purchases for items you still have or that have been used to make something you still have within the last 4 years.
Please note that you will need to have the VAT receipts for these payments and have information about how these relate to your business now.
You may need to provide the figures for these expenses when you register.
What happens next?
You need to start charging VAT on your products or services (that are not VAT exempt) from the date of registration. You will not receive your VAT number until your certificate arrives which can take up to 30 days. In the meantime you will not be able to issue a VAT invoice, but you will need to account for (and charge) VAT. You may need to reissue VAT invoices/ receipts to customers once your certificate arrives. How you do this will depend on the type of business you are have and what procedures would be convenient for you and your customers.
Your first VAT Return
HMRC give you one month and seven days from the end of your VAT period to file your return. Your VAT return periods will be stated on your registration certificate. For example if your first period-end date is 1st April 2019 your first return will need to be submitted between 2nd April 2019 and 9th May 2019.
VAT returns for periods beginning after 6th April 2019 will need to be submitted digitally under the new MTD rules. It would make sense if you are registering now to sign straight up to MTD and start using a software that can submit returns. HMRC have a list of all MTD compliant software on their website, you can view this here: https://www.tax.service.gov.uk/making-tax-digital-software