At first glance, completing VAT registration may seem daunting due to the bureaucratic paperwork involved. However, with a proper understanding of VAT’s importance and some essential tips, the process does not need to be difficult.
In fact, proper registration offers clear advantages that can significantly boost your business’s growth and bottom line.
Registering for VAT allows you to collect and reclaim this tax, putting your business in a stronger financial position than non-registered firms. By collecting VAT from customers on sales, you generate extra revenue with each transaction. Then, by reclaiming input VAT paid on purchases and expenses, your business costs are effectively reduced.
While registration does involve paperwork, leveraging a few key tips simplifies the process.
This article explores five essential tips to make your VAT registration process smooth and hassle-free.
1. Determine If You Are VAT Registrable
The most important first step is establishing whether or not your business even needs to register for VAT in the first place. So, how to do a vat registration? is a common question for business owners who want to understand the registration process.
Only businesses that exceed the annual VAT registration threshold are required to register. The current VAT registration threshold in the UK is £85,000. If your total taxable turnover for the past 12 months has not exceeded this figure, you do not need to register yet.
However, suppose your business is growing rapidly, and you anticipate exceeding the threshold in the future. In that case, it’s generally advisable to register for VAT voluntarily before you’re legally required to do so.
This avoids any potential backdated VAT charges further down the line. You should also consider registering if you regularly supply zero-rated or exempt goods and services, as this can enable you to reclaim VAT on your business expenses.
2. Calculate Your Start Date
Also, once you’ve determined your business needs to register, it’s time to choose a start date. Your start date should generally be the first day of the VAT period (quarter or month) on which your registration threshold was or is expected to be exceeded. For example, if you exceeded £85,000 on April 15th, your start date would be April 1st.
Your start date can also be backdated to as early as four years ago if your business has been trading that long. This allows you to reclaim VAT dating back to that start date on existing business assets and stock. Just be aware that backdating also means paying VAT and submitting returns dating back to then as well. Choose a start date carefully based on your unique business situation.
3. Complete VAT Registration Application
Additionally, to register for VAT officially, you need to complete an online application form on the HMRC website. The form asks for basic information like your business name, contact details, and answers determining your VAT regime classification (standard or flat rate). It’s important to provide accurate information, as mistakes can delay your registration.
You’ll also need your business start date chosen above, estimated VAT taxable turnover for the next 12 months, and your VAT accounting scheme preference (annual, quarterly or monthly). HMRC aims to process VAT applications within ten working days as long as you’ve provided everything correctly. Upon approval, you’ll receive your VAT registration number to use going forward.
4. Submit VAT Returns on Time
Besides, once registered, you must submit VAT returns to HMRC by their due dates. Your filing frequency will depend on the estimated annual turnover declared in your application. Returns are generally due either quarterly (if under £1,350,000 annual turnover), monthly (if over £1,350,000), or annually (if using the Flat Rate Scheme).
The deadline for submitting each return is roughly a month after the end of the tax period. For example, a quarterly return covering January-March would be due by April 30th. Submitting on time avoids penalties, and you’ll want to mark these mandatory due dates in your business calendar.
Consider asking your accountant for assistance compiling returns accurately, as mistakes can result in adjustments or fines.
5. Keep Proper VAT Records
To submit correct VAT returns and support any VAT reclaims, you need to maintain thorough accounting records. For VAT purposes, you should keep records of all purchases, sales, expenses and income. Receipts for all business expenses and assets help substantiate deductible input VAT.
Ideally, digital records should be maintained in accounting software for ease of reporting and backup. Separate your business and personal finances, as only VAT incurred through running your company is deductible.
Keep records for at least six years in case of any HMRC compliance checks later on. Proper records are crucial for justifying any VAT figures and avoiding issues down the line.
Bottom line
Remember that VAT registration is an important milestone for any growing business. While it requires some upfront effort, taking the time to fully understand your obligations and file correctly ensures your company remains in good standing with HMRC.
More importantly, proper registration allows you to benefit from VAT in a way that strengthens your bottom line for years to come. Staying on top of your record keeping and continuing education on tax law changes will serve your business well as it expands.
With the right processes and mindset, VAT can transform from a chore into an asset that fuels your success. Stay focused on serving your customers and achieving your business goals – the rest will follow smoothly through ongoing compliance. Your diligence in navigating registration today paves the path towards prosperity tomorrow.