– VAT Registration Threshold
– How to calculate VAT Taxable Turnover
– When to Register
– Businesses outside the UK
– Purchases made before VAT registration
– How to register
– Changes to your details
– Cancel your registration
– Accounting for VAT when you deregister
The VAT registration threshold in the UK is £85,000. If the Taxable Turnover exceeds the amount, or you expect it will, you must register for VAT.
You or your business must register for VAT with HMRC if the taxable turnover exceeds the registration threshold in any regular twelve months period. For example, it can the Jan to March or can be from July to Jun, etc. The period is not fixed. Note that you must check the turnover regularly so that if at any point you are likely to exceed, you register.
Note: The VAT registration threshold usually goes up on 01 April.
Taxable Turnover– It is the total value of sales that are not exempt from VAT, including
– Any business goods that were taken for personal use
–Zero-rated sales must be included
–Any business goods that were rented or loaned to the customers/clients
–Goods that were obtained through barter, exchange, or as a gift
–If the building work done is over £100,000.00
–Services that you have received in other countries that you had to ‘reverse charge’
As mentioned earlier, if your taxable turnover goes over the £85,000 threshold, or you know it will, and the total value of sales that are not exempt from VAT.
– You expect your VAT taxable turnover to exceed £85,000 in the next 30 days
– Your business had a VAT taxable turnover of more than £85,000 over the last 12 months.
You must register within 30days if you realize that the VAT taxable turnover is going to exceed the threshold within 30 days.
For example, if you realized that on 01 Jun that your taxable turnover is going to exceed £85,000. Then the effective date of registration is 01 June and you must register by 30th June.
You must register by the end of the month if your total taxable turnover for the last 12 months is over £85000 and it must be within 30 days of the end of the month when you went over the threshold.
For example, if for the period 07/04/2019 to 06/04/2020 the taxable Turnover is £96,000 and is the first time it has gone over. You must register by 30/04/2020 with the effective date of registration of 01/05/2020.
If you take over a VAT- the registered business: You may have to register for VAT
Voluntary registration: You can apply to register for VAT voluntarily if your business turnover is less than £85000. The VAT return must be filed from the date of registration.
There is no threshold if neither you nor your business is based in the UK, however, you must register as soon as you supply goods and services in the UK or in the next 30 days in the UK. Remember 30 days is key.
Foreign companies may register for the VAT in the UK without a need to form a local company and this is known as non-resident VAT trading.
After registration
-Account for UK VAT
-Prepare and submit the VAT
-PAY the VAT bill if applicable
If you do not register for VAT on time:
-HMRC May charge interest and penalties.
-The amount of penalty is the % of the VAT bill from the date when you should have registered to the date when HMRC received an application or became fully aware of your need to be registered.
-The percentage is based on how late were you in registering
Less than 9 months- 5%
9-18 months- 10%
more than 18 months- 15%
HMRC has set a time limit for backdating claims for VAT paid before registration
-4 years for goods/inventory you have and or that were used to make other goods you still have.
-6 months of services.
The VAT reclaim is only applicable for the invoices that meet the business purpose and should be in the name of the VAT registered business. This must be claimed on the first VAT return.
Trap: The VAT on goods or services, must not have been utilized (consumed) before the date of registration
The VAT paid on the goods/inventory purchased in the 4 year period can be claimed. The assets must be bought into use by the business during that time and must still be owned by the business when first registered for VAT. The VAT can be claimed on the original purchase price of the goods/assets. We do not have to go through any depreciation adjustment.
For example, you bought a laptop 3 years ago to help run your business. At the time you were not VAT registered, so paid a cost of £2000 + VAT, of a total of £2400.00 You have now registered for VAT, you may still use the laptop for business purposes and retain the original receipt. You will be able to claim back £2400 in VAT on your first VAT return. Please note that the VAT records have to be kept for at least 6 years and 10 years if used VAT moss.
Unless it’s clear that the cost of a pre-registration service was fully used against supplies made prior to the registration, VAT paid on the purchases can be claimed. The lease rental charges on the equipment that finished to be used before the VAT registration cannot be claimed. Electricity bills before the registration date cannot be claimed.
XYZ Ltd paid VAT on services before registration, on the rent of its premises, equipment leasing, telephone, and Internet bills. The rule is that where invoices for these were issued more than six months before registration XYZ cannot reclaim the VAT. But for the more recent purchases, the position isn’t clear. XYZ Ltd must decide whether the services have been consumed at the time of registration. Electricity bills before the registration date cannot be claimed as this would have been completely consumed on the VAT registration date.
VAT on the continuous charges e.g. bookkeeping fees, accounting services count as supplied at the date an invoice is issued for these and not when they are carried out. The VAT is paid on those services within six months before registration can be reclaimed.
Options:
Online registration: Most businesses can register online and including partnerships and a group of companies registering under on VAT number.
Unable to register online if:
– Applying for the Agricultural flat rate scheme
–EU business distance selling to Northern Ireland
–Registering companies with separate VAT number
–Importing goods worth more than £85000 into Northern Ireland from any EU country.
–Disposing of assets and you have claimed Directive refunds on them
For ONLINE registration
Require Government Gateway ID and Passport
VIA Post
–Please fill VAT 1 form (Vat form 1)
–Additional form has to be filled for
To join Agricultural flat rate scheme VAT98
EU distance selling- VAT1A
Registering companies with separate VAT numbers VAT50 and VAT51
Importing goods more than £85000 into Northern Ireland from any EU country (VAT1B)
Disposing of assets and you have claimed Directive refunds- VAT1C
Online applications take around 20 days, Print and post-application can take up to 30 days. They make ask for further documents and can only be contacted once 30 days are elapsed.
If successful they will send the 9 digit VAT number and the country code is GB. For example, the VAT number will be GB 111111111
VAT registration details must always be up to date.
Can be changed online
VAT online account:
You may have already created the government gateway ID and password and added VAT services. You are able to change your details
By Post
Use form VAT484, fill, print, sign, and date, The address is given on page2, and form VAT2 to change partnership details.
Timeframe for notifications
Within 30 days for:
Name, trading name, the main address of the business (this address is where VAT records are kept)
Agent/accountants details
Home address of the partners and members of a partnership
For bank details
Within 14 days
Direct debit for VAT payments change, never do it 5 working days before the VAT is due.
Death and illness
Within 21 days, with the new responsible person details
Cancel Registration
If no longer eligible to be VAT registered:
a) Stop trading or making taxable supplies. But still, need to file a cessation return
b) Join VAT group
c) Turnover falls below the de-registration threshold of £ 83,000
d) I am changing my legal entity or I have transferred or sold my business as going concerned
e) The business has gone into liquidation
This can be done online through the government gateway portal or via the post-completing the VAT 7 form.
– You must account for VAT on stock and assets at the deregistration date. Assets like interest in land (but only if they would be taxable if you sold them, for example, where the option to tax has been made) and tangible goods like an unsold stock, plant, furniture, commercial vehicles and computers on which you claimed VAT when they were bought.
– You do not account for intangible assets like patents, copyright, and goodwill. The only time you must include in your VAT calculations is if you obtained goods free of VAT as assets of a business transferred to you as a going concern from a taxable person.
– If you obtained land or buildings as assets of a business transferred to you as a going concern, then you must account for VAT on them if you have ‘opted to tax’.
– You can exclude items on which you couldn’t reclaim VAT when you bought them. Examples include goods you have bought from unregistered businesses or private individuals, cars (except private taxis, self-drive hire cars, and driving school cars on which input tax has been claimed), goods bought under a VAT margin scheme, goods used for business entertainment.
– If you have goods on hand when registration is canceled, HMRC usually considers this to count as a supply. So if you own any capital items when you cancel your registration you may be required to make a final adjustment in respect of any items still within the adjustment period. This adjustment should be made on your final return.
– If the total value of VAT is less than £1000.00 no VAT is due. For example is the total value of assets is £6000.00 gross it will have £1000.00 VAT, which means no VAT due but it is 6001.00 then all of the amounts must be included in the cessation VAT return.
– The CGS applies to capital expenditure on land and buildings with a value of £250,000 or more (exclusive of VAT) which was subject to VAT at the standard or reduced rate. If you are in any doubt about whether or not you have to make an adjustment, you should contact HMRC.
