If your business’s taxable turnover exceeds £85000, you need to register with HMRC for VAT accounting. Doing this for the first time can be tricky – there are several steps to keep in mind, and you might be anxious about whether or not your registration is overdue.
That is why we have put together this guide to help you out, whether you have just met the turnover threshold, are choosing to register for VAT online voluntarily, or are simply curious about how it works:
When you must register for VAT accounting
If your taxable business turnover exceeded £85000 at any point during the last 12 months, you must register for VAT. In fact, the registration has to happen within 30 days of the end of the month when you cross the threshold. Your effective registration date is the first day of the second month after you cross it. There are also other scenarios to consider:
- You must register for VAT online if you expect your turnover to go over £85000 sometime during the next 30 days. In this case, the effective date of registration is when you realised you would cross the threshold, not the day you crossed it.
- In addition, regardless of your turnover, you will need to register for VAT accounting if:
- You or your business is based outside the UK
- You supply goods or services to the UK or expect to do so within the next 30 days
- If you take over a VAT-registered business, you must register if the combined taxable turnover of your original business and the new business exceeds the threshold.
- If you sell VAT-exempt goods and services but buy goods worth over £85000 from VAT-registered suppliers in the EU to use in your business, you must register for VAT online.
- If you register late, you must pay HMRC any VAT you owe from the date you should have registered. You may also need to pay an additional penalty depending on how late you are and how much VAT you owe.
If none of these conditions apply, you can still register voluntarily for VAT accounting. If you do, the same rule applies to paying VAT to HMRC from your effective registration date.
Easy VAT registration tips for your help
Make the registration process as smooth and straightforward as possible, and focus on growing your business. For starters, if you do not have a Government Gateway user ID, you will be issued one when you sign up for the first time. You will also get your VAT online account. Under some circumstances, you must apply by post. These include:
- Applying for a registration exemption
- Joining the Flat Rate Scheme
- “Distance selling” to Northern Ireland as an EU business
- Disposing of assets that you have claimed Directive refunds on
- Importing goods worth more than £85000 from Northern Ireland in an EU country
- Registering different divisions or business units with separate VAT accounting numbers
Once your registration is complete, you will get a 9-digit VAT number and details about when and how to submit your first VAT accounting payment. You will also get a confirmation of your effective date of registration. You can start charging and reclaiming VAT from that date.
You must note that you cannot charge VAT unless you receive your VAT number. However, you can raise your sale prices to account for the VAT you will pay to HMRC.
Why online VAT accounting registrations by agents often get rejected
You can appoint an agent to complete your VAT registration for you. However, many applications get rejected or need to be reexamined by a caseworker. The main reasons rejections happen include the following:
- Business verification incomplete or failed
- Applicant’s details needing further validation
- Bank details given for VAT accounting repayments not appearing related to the business
- The same address used as the business address and the business owner’s home address (if the owner works from home, that needs to be specified clearly)
Digital ID not attached (ID verification by post is an option, but we recommend doing it online)
These problems can be solved by:
- Having complete and accurate business details ready prior to registration
- Having a UK bank account for VAT repayments in the name of the business, its sole trader owner or one of its partners
- Having digital IDs ready (the online HMRC registration will ask for one piece of a photo ID and two pieces of non-photo IDs, such as a birth certificate or utility bills, each to be scanned and uploaded as a different file)
- Get an expert like Lyel Accountants to help you properly register for VAT online – without any errors or misses
How much does VAT accounting registration cost?
The process of VAT registration on the HMRC website is free. However, you could incur some extra costs depending on how you file your VAT returns. Installing an MTD-approved accounting software, for instance, will cost you a certain amount each month.
You must also pay a fee if you decide to ask an accountant to file on your behalf. However, given that these options will help you prepare accurate returns and stay compliant, we think they are worth investing in. Trust us – there are many benefits of being VAT-registered, so do not wait till the last minute.
Over to you
Hopefully, this blog has demystified the VAT accounting registration process for you and will help you be fully prepared when it is time to sign up. Refer to the HMRC website for more details, or contact Lyel Accountants for help.
Remember – if you are confused about anything, confirm. It is always better to double-check now than risk getting into trouble with HMRC later. Good luck!
