A beginner’s guide to VAT

Registration for VAT is compulsory in certain situations, but also available on a voluntary basis subject to specific criteria.

In simple terms, you must register your business for VAT if what is known as your taxable supplies are above a certain limit. If you supply goods and services in your business, these will be taxable, unless the government has specifically laid down that they are not.

“You must register for VAT when the value of your taxable supplies exceeds the registration threshold. This occurs when the value of your taxable supplies in the past 12 months or less has exceeded the current VAT registration threshold of £56,000, or the value of your taxable supplies in the next 30 days alone is expected to exceed this threshold,” explains Brian Baker, founder of accountancy practice The Baker Partnership.

If goods and services are not taxable, they are known as exempt, and cover items such as insurance and postage.

If the value of your taxable supplies is below the threshold, you can still register for VAT on a voluntary basis.

“You can do this if you feel it will benefit your business. This will generally be beneficial for those businesses that sell mainly to other VAT-registered businesses, as their customers can reclaim any VAT charged so there is no effective increase in selling prices, and the VAT element of purchases can then be reclaimed,” adds Baker.

For more information on whether or not a business should be registered for VAT, visit the Customs and Excise website. If your business does need to be registered, you can download the necessary forms there.

See also: The facts about VAT registration

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