Understanding VAT Thresholds
VAT (Value Added Tax) is a tax added to most products and services sold by commercial businesses so long as their annual turnover is above the threshold.
Businesses have to register for VAT if their taxable turnover is more than £85,000. They can also opt to register if their turnover is less than £85,000. In this blog, we look at the details of the VAT threshold in the UK.
WHAT IS THE UK VAT THRESHOLD?
The VAT threshold in the UK is the level of annual turnover that a business must reach in order to register for VAT, this is a legal requirement by HMRC. Any business with a taxable turnover that is more than £85,000 must register for VAT.
WHEN DO I NEED TO REGISTER FOR VAT?
If your business turnover exceeds the VAT threshold within any 12-month period, or if it is liable to within the next 30 days, you should be registering for VAT. At GRC Accountants we will advise you if and when this becomes applicable to your business. The 12-month period does not need to line up with the tax year, we will monitor your financial position closely to ensure you meet HMRC’s guidelines.
CAN I CHOOSE TO BECOME VAT REGISTERED VOLUNTARILY?
Becoming a VAT registered business can have its advantages, even if you do not meet the VAT threshold.
These benefits can include:
1. The ability to claim back VAT costs for your business
2. The ability to work with other businesses who require you to have a VAT registration number
WHAT ARE THE RESPONSIBILITIES THAT COME WITH BEING VAT REGISTERED?
Firstly, you must remember that, as soon as you reach the threshold, you have only 30 days to register with HMRC. These responsibilities will begin as soon as you have been registered.
You will need to charge VAT on all of your products and/or services.
You will need to keep valid and up to date VAT accounts and records.
You will need to submit a VAT return to HMRC annually.
You will need to pay VAT on the goods supplied to your business by your vendors.
WHAT ARE THE PENALTIES IF I DON’T REGISTER FOR VAT WHEN NEEDED?
If you fail to register for VAT when you meet the threshold, you will face a a penalty.
Introduced earlier this year, late submission penalties now work on a points-based system. For each return you submit late, you will receive a penalty point until you reach the penalty point threshold.
When you reach the threshold, you’ll receive a £200 penalty. You’ll also receive a further £200 penalty for each subsequent late submission while you’re at the threshold. The penalty point threshold varies for each business and is set by your accounting period. For more detailed information visit https://www.gov.uk/guidance/penalty-points-and-penalties-if-you-submit-your-vat-return-late
Are you looking for advice on registering for VAT?
Our team at GRC Accountants are here to support you and prevent you from incurring any penalty. Get in touch with us today to find out more about how we can help you.