If you operate a limited company or a sole trader business you should be aware of what triggers the requirement to register for VAT.
This is important as once a business meets the obligation to register for VAT, 20% VAT must be added to the prices charged by the company. If a company owner fails to do this on time then the prices are likely to be assumed as being VAT inclusive which can cause a serious dent in company profits.
You must register for VAT and charge VAT to your customers at a rate of 20% when:
1. Your VAT taxable turnover is above £82,000 (2015-16 threshold)
2. You expect your turnover to exceed the threshold within the next 30 days
You can register for VAT on a voluntary basis, regardless of your level of turnover, and this is sometimes a wise tax strategy. More specifically a business can achieve gains from utilising the VAT Flat Rate Scheme, which we explained in more detail in an earlier blog post.
Non allowable VAT registration avoidance strategies
HRMC does not allow the following in an attempt to avoid VAT registration and is very likely to come down heavy on offenders:
1. Splitting the business into two or more companies to avoid reaching the threshold
2. Excluding overseas sales from turnover
If you need any further help or advice with your VAT matters then contact one of our accountants directly from our cheap accounting service.