May I Register for VAT on My Own?

May I Register for VAT on My Own?

VAT is perhaps the field of taxation that creates the most confusion among business owners. Value Added Tax is levied on almost everything we purchase and sell, and if the company makes more than a certain amount, you must apply for VAT registration. However, if the company is beyond this threshold, you should willingly apply for it. But when is this a smart idea for your company?

VAT registration is required.

If your taxable stocks exceed the existing VAT requirement for a 12-month term, you must apply for VAT. At the moment, the number is £83,000, but if your average revenue exceeds this figure, you must apply for VAT.

This number refers to turnover rather than benefit because it is the figure before all costs, taxes, or national insurance are deducted. It must still pay for all taxable supplies, even though the rate is zero percent – something that many company owners find perplexing. The only things that do not need to be considered are those that are VAT-free, so hiring professional chartered accountants in London who knows the complexities of VAT is a smart idea.

Registration on one's own initiative

But why will a company that falls below this level decide that it would be useful to apply for VAT in the first place? It is a major decision that can not be made without seeking professional advice. However, there might be advantages of doing so.

The key reasons for this are to reclaim VAT and to make a good impact on customers. When you owe VAT on your goods and services once you have paid for VAT, you can recover the VAT that most companies charge you – this is known as input tax. If your input tax exceeds your output tax for any given time, you will argue the difference from HMRC.

Customers have a favourable opinion of businesses that are VAT licenced, and this positive impression may be worth the effort. Otherwise, you could be seen as a "thin" company, which may make big corporations less likely to do business with you. On the other hand, whether you work with other companies or clients of a similar scale, this might be less of a concern.

The disadvantages of filing for VAT

That is not to suggest that registering for VAT is without drawbacks, and there are others to remember before making the decision.

To begin with, after you are VAT licenced, you will have to charge more for your goods so you would apply this figure to the price. You can reclaim this through the system, but there is always the risk of losing customers due to a price rise, particularly if they are unable to reclaim the VAT.

Furthermore, if your output tax exceeds your input tax, you will be required to pay the difference to HMRC. This can lead to cash flow issues and the inability to accurately predict earnings for a given timeframe.

There is also the question of increased paperwork to complete the VAT returns, which are due quarterly. There is a provision for VAT accounting in bookkeeping, as well as reporting methods, which can be more expensive.

Cheap Accountants in London are proud to offer wide range of affordable accounting and taxation services to businesses nationwide.