Value added tax, or VAT, is something that each of us pays on goods and services every day, often without even realising. When it comes to a small business, you need to become VAT registered as soon as your taxable turnover reaches £85,000.
In fact, if you’re partway through the financial year and expect your upcoming sales to take you over the threshold, it’s important to register right away, otherwise HMRC will backdate what you owe, which can significantly disrupt your cash flow.
How does VAT work?
With VAT registration comes a few perks and a whole lot of admin, which is why outsourcing your tax and VAT management to TreyBridge Accountants ensures that everything runs smoothly at all times.
Once registered, which is something that can be carried out by our team, you’re all set to charge VAT to your customers. However, you must bear in mind that a VAT registered business is legally obliged to charge it on all transactions within the UK and European Union. So if, for example, you have customers that are members of the public, businesses with very limited budgets or companies that aren’t VAT registered themselves, you can’t choose to waive the VAT you charge.
What are the benefits of being VAT registered?
There are actually quite a few advantages to running a VAT registered business:
You can claim VAT back on multiple expenses, including office furniture, equipment, IT costs, vehicles, fuel, business trips, and yes, even professional services such as accounting. Exceptions include products and services for personal use, entertaining anyone other than your own staff, and some second-hand goods.
You get a VAT number, which makes your company appear even more professional and trustworthy. This should be included on your website, stationery, documents and so on.
Once registered, you can also reclaim VAT on eligible goods and services bought within the last four years. This applies as long as you’ve been in business for that period, you still use the items in question, and have proof of purchase.
Another option is becoming VAT registered before you reach the threshold. Many businesses will only work with suppliers that can supply VAT invoices, so it could result in you gaining new clients much more quickly than if you waited to hit the £85,000 mark.
Registering early also means that you’re prepared for the future and setting the scene for ongoing growth. Unless you can’t imagine your business ever making £85,000 in taxable income, registering for VAT sooner rather than later removes the risk of exceeding the threshold without realising and being landed with a large bill from HMRC.
Get in touch
VAT is a very complex system, so you need an experienced professional to make sure that all of your accounts are in line with legislation. To find out more, call our Northern office on 01482 235575 or our London office on 0207 885 0605. Alternatively, you can fill in our contact form and one of our specialists will get back to you right away.