VAT Registration in the UK

VAT Registration in the UK

This blog provides an overview of all aspects of VAT registration and is based on information obtained from the following HMRC web site:-

VAT Registration Overview

You must register for VAT with HMRC if your business’s VAT taxable turnover is more than £85,000. When you register, HMRC will send you a VAT registration certificate which will confirm:-

  • Your VAT number
  • When to submit your first VAT return and payment
  • Your “effective date of registration” (date from which you are registered for VAT)

You can register voluntarily if your turnover is under £85,000 unless everything that you sell is exempt. You will have certain responsibilities if you register for VAT.

Your VAT responsibilities

From the “effective date of registration” you must:-

  • Charge the correct amount of VAT
  • Pay any VAT due to HMRC
  • Submit VAT returns
  • Keep VAT records and a VAT account

While you wait for your VAT Registration

You cannot charge or show VAT on your invoices until you receive your VAT number from HMRC. However, you still have to pay the VAT to HMRC for this period.

You should increase your prices to allow for this and tell your customers why. Once you receive your VAT number, you can then reissue the invoices showing the VAT.

How to register

Most businesses can register online including partnerships and a group of companies registering under one number.

In order to do this, you will require to create a VAT online account (also called a Government gateway account). You will need this to submit your VAT returns to HMRC.

When you cannot register online

You must register by post using form VAT1 if you:-

  • Want to apply for a registration exception
  • Are joining the Agricultural Flat Rate Scheme
  • Registering the divisions or business units of a body corporate under separate VAT numbers

Receiving your VAT certificate

You should receive your VAT registration certificate within 14 days though it can take longer. It is sent either:-

  • To your VAT online account
  • By post – if an agent registers you or you cannot register online

When to register

You must register when you go over the threshold or you know that you will. The threshold is based on your VAT taxable turnover – the total of everything you sold that is not VAT exempt.

Compulsory VAT Registration

You must register for VAT if either:-

  • Your VAT taxable turnover is more than £85,000 (the threshold) in a 12 month period
  • You expect to go over the threshold in a single 30 day period

Late Registration

You must register within 30 days of your business turnover exceeding the threshold. If you register late, you must pay what you owe from the date when you should have registered.

You may receive a penalty depending on how much you owe and how late your registration is.

Registration “Exception”

You can apply for a registration “exception” if your taxable turnover goes above the threshold temporarily/

Write to HMRC with evidence showing why you believe the VAT taxable turnover will not go over the VAT deregistration limit of £83,000 in the next 12 months.

HMRC will consider your exception and write to confirm whether you receive one or not. If not, they will register you for VAT.

Registering for VAT in other EU countries

Usually, you only require to register for VAT in the country where you are based. However, there are different rules if you are supplying digital services to consumers based in other EU countries.

Digital services includes broadcasting, telecommunications services, video on demand, downloadable music, games, apps, software and ebooks.

Usually, you only require to register for VAT in the country where you are based. However, if you are supplying digital services to consumers based in other EU countries, you must either:-

  • Register for VAT in each country where you supply digital services
  • Sign up for the VAT MOSS service

Calculate your VAT taxable turnover

VAT taxable turnover is the total value of everything you sell that is not exempt from VAT.

The current threshold is £85,000 and it usually goes up on 1st April each year. There are different thresholds for buying and selling from other EU countries.

You must register with HMRC for VAT if the VAT taxable turnover goes over the registration threshold in any rolling 12 month period. This is not a fixed period like the tax year or the calendar year. It could be any period (for example the start of June to the end of May).

In order to check if you have gone over the threshold in any 12 month period, add together the total value of your UK sales that are not VAT exempt including:-

  • Goods you hired or loaned to customers
  • Business goods used for personal reasons
  • Goods you bartered, part exchanged or gave as gifts

In order to check if you have gone over the threshold in any 12 month period, add together the total value of your UK sales that are not VAT exempt including:-

  • Services you received from businesses in other countries that you had to “reverse charge”
  • Building work over £100,000 your business did for itself

Purchases made before VAT registration

There is a time limit for backdating claims for VAT paid before registration. From your date of registration, the time limit is:-

  • 4 years for goods that you still have or that were used to make other goods you still have
  • 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your “business purpose”. This means they must relate to VAT taxable goods or services that you supply.

You should reclaim any pre-registration expenses on your first VAT return (add them to the box 4 figure) and keep records including:-

  • Invoices and receipts
  • A description and purchase dates
  • Information about how they relate to your business now

Changes to your VAT Registration details

You must keep your VAT registration details up to date. You can change your details:-

  • Online – through your VAT online account
  • By post – using form VAT484

When to tell HMRC

You need to tell HMRC about any changes to the items listed below within 30 days of the change or you could receive a financial penalty:-

  • Name, trading name or main address of your business
  • The accountant or agent who deals with your VAT
  • The members of a partnership or the name or home address of any of the partners

Changing Bank Details

HMRC must be told at least 14 days in advance if you are changing your VAT details.

You also have to tell your bank to change your direct debit details if you pay your VAT by direct debit. You should not do this within 5 banking days before or after your VAT return is due.

Death and illness

You must tell HMRC within 21 days if you take on the VAT responsibilities of someone who has died or is ill.

You can only do this by sending form VAT484 in the post including details of the date of death or the date that the illness started.

Cancelling the VAT registration

You must cancel your registration if you are no longer eligible to be VAT registered. Possible reasons for this are if you:-

  • stop trading or stop making VAT taxable supplies
  • join a VAT group

It is necessary to cancel within 30 days if you stop being eligible or you may be charged a penalty.

You can ask HMRC to cancel your registration if your VAT taxable turnover falls below the deregistration threshold of £83,000. You can cancel your registration either online or by filling out form VAT7 and sending it to HMRC by post.

It usually takes HMRC 3 weeks to confirm your deregistration and the official deregistration date.  This is either the date when the reason for your cancellation took effect (e.g. the day that you stopped trading) or the date that you asked to deregister if it is voluntary.

HMRC will send confirmation to your VAT online account (or through the post if you do not apply online). From the date of deregistration, you must stop charging VAT and keep your VAT records for 6 years. HMRC will automatically reregister you if they realise you should not have cancelled. You will have to account for any VAT you should have paid in the meantime.

VAT after you cancel registration

You will have to submit a final VAT return for the period up to and including the deregistration date. On this, you must account for any stock and also other assets you have on this date if:-

  • You could reclaim VAT when you bought them
  • The total VAT due on these assets is over £1,000

Do not wait until you have received all your invoices before submitting your final VAT return. You will still be able to reclaim VAT on anything you bought for your business while still registered once you receive the invoices.

Transfer VAT Registration

You can transfer a VAT registration from one business to another. This may occur if you take over a company and want to keep using its VAT number.

The buyer and seller both need to tell HMRC. The seller should cancel any direct debits on their VAT online account and the buyer should also set up new ones.

You can apply to transfer a VAT registration:-

  • Online – through your VAT online account
  • By post – using form VAT68

It usually takes 3 weeks for HMRC to confirm the transfer. If necessary the:-

  • seller should cancel their accountant’s access to their VAT online account if they had authorised them to deal with the VAT
  • buyer should contact HMRC within 21 days of the transfer application if they want to keep the seller’s accountant
  • seller must give their records to the buyer if they are passing on the VAT number
  • buyer should replace any self billing arrangements with new ones
  • buyer may have to register for VAT from the day the business is transferred

For further information on VAT registration, please contact Stallion Accountancy Services.

About the author...

George Greer is an experienced ACCA qualified Business Owner with a demonstrated history of working in the accounting industry. He is skilled in Accounts and Finance Management, Budgeting and Business Planning with excellent knowledge of Sage and Xero Products. Strong professional with a BSc focused in Business Computing Systems from City University London.

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