VAT Registered – Are you considering it?

In this article, we discuss;

VAT registration
VAT

Lillian Barnard

Share this article

In this article:

Picture of About Lillian Barnard

About Lillian Barnard

Lillian obtained her qualification in financial management in 2016 and previously did in-house accounting for a medical practice.

Read More

What is VAT?

Value Added Tax is a government tax on goods and services, and it’s based on the increase in value of a product or service at each stage of production and distribution. The rate of VAT depends on the nature of the goods or services being sold and purchased.

It was initially brought in during Edward Heath’s prime ministership in 1973, as part of the UK’s condition of joining what was then the European Economic Community, and it started off as a simple 10% tax on nearly all goods bought from a business. It replaced the Purchase Tax, which was a complicated system with numerous different rates within it, and is administered by HMRC. VAT is the third largest source of government revenue after income tax and National Insurance, and it generated £125.3 billion in 2017/2018.

Do I need to register for VAT?

All businesses that provide taxable goods and services must register for VAT if their taxable turnover is more than £85,000, although if they have a lower turnover they can still choose to register.
Registered businesses must pay HMRC the VAT they have charged, but they may offset this with the VAT they have incurred on goods or services they have purchased.

What are the benefits of being VAT registered?

• Selling to a VAT registered business? They can reclaim the VAT from HMRC so your selling price will be competitive and you can recover the VAT on your costs.
• Having to maintain up-to-date records will mean you are better informed about the running costs of your business.
• You can claim VAT on certain items that you purchased prior to the date of VAT registration.
• You can reclaim the VAT!
• Your Vatable sales are lower than your Vatable costs. This may be because you’re accumulating stock or because your sales are below the standard rate of 20% at either the reduced rate of 5% or zero rate 0%.

What are the disadvantages to being VAT registered?

• There will be an increase in your admin and bookkeeping fees. But there is a huge amount of software that can help you. At AMR we can also you train on this software and help you prepare for the move.
• If your customers are not VAT registered than you could appear 20% more expensive.

VAT registration and Making Tax Digital (MTD)
From 1 April 2022 anyone who is VAT registered will have to comply with Making Tax Digital (MTD)

VAT flowchart

More articles you might like

Why choose AMR Bookkeeping Solutions?

Professionalism

We combine the highest level of professionalism with a friendly, clear approach for all of our clients.

Trust

Our approach is tailored to the needs of each individual client, and we build personal relationships to make sure that our clients can have complete trust in what we do.

AAT Qualified

All of our services are provided by our team of Association of Accounting Technicians (AAT) qualified bookkeepers, highly experienced bookkeeping experts and certified accountants.

CPD Trained

Each member of the team undergoes Continuing Professional Development (CPD) which keeps them right up to date with changing tax legislation.

Accredited Experts

All our bookkeepers are accredited in leading accountancy software Sage, Xero and QuickBooks.

AAT logo
Xero Gold Partner
Sage logo
Intuit Quickbooks ProAdvisor Gold
Freeagent logo

Get in touch for a free, no obligation consultation

Find out how AMR Bookkeeping Solutions can provide the right support for your business, send us your details and one of our experts will get in touch with you without delay.

Alternatively, you are welcome to contact us by phone on 01892 559480

You can also pop into our offices in Tonbridge.