Pros and cons of voluntary VAT registration

In this article, we discuss;

Voluntary registration – the potential advantages
Voluntary registration – the potential disadvantages
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Estelle Hardwick

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In this article:

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About Estelle Hardwick

Estelle is the Director of AMR, overseeing the Tonbridge, Tunbridge Wells and Chatham branches. She makes sure that AMR provides exceptional support to each and every client.

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The decision as to whether you should register for VAT is an important one for any business owner, but as with any tax issue, it’s not straightforward! In this blog, we go over the pros and cons to help you decide whether it’s right for your business.

VAT is a tax levied on most goods and services; check here for the list of exemptions. The VAT registration threshold is the turnover limit below which there is no requirement to register for VAT, and the current threshold is £85,000. Registered businesses need to file regular quarterly returns to HMRC and make the necessary payments.

If your turnover is less than £85,000 you don’t need to charge VAT. However, you can choose to register voluntarily, and there are benefits to doing this.

Voluntary registration – the potential advantages

  • Reclaim VAT

You can claim back any VAT you have paid on services and goods you have purchased from other VAT-registered businesses, which may represent a considerable saving.

  • Promote business with other VAT-registered companies

If your customers are VAT-registered, they can reclaim VAT charged on your invoices. This is therefore an incentive for them to do business with other VAT-registered companies.

  • Give your business a competent and professional image

VAT registration is an important message to your current and potential customers; nobody will know your registration is voluntary and it will be assumed that your turnover is higher and you have ambitious plans for your business. It is also a recognised mark of trustworthiness.

  • Rationalise your bookkeeping

Keeping track of VAT can be a laborious process. VAT registration enables your business to take advantage of various government VAT schemes. The VAT Cash Accounting Scheme, for example, which you can use if your annual VAT taxable turnover is £1.5 million or less, allows you to pay VAT to HMRC when your customer pays you rather than when you invoice them. The VAT Flat Rate Scheme enables you to work out what you owe HMRC in VAT as a percentage of your gross turnover, and is for use by small businesses with an annual taxable turnover of £150,000 or less, excluding VAT.

Voluntary registration – the potential disadvantages

  • Loss of competitive advantage

If the majority of your customers are not VAT registered, then voluntary registration may put your business at a disadvantage, as your prices will be seen as higher than your competitors due to the inclusion of VAT.

  • Complicated administration

The various VAT schemes are intended to help VAT-registered businesses comply with regulations. In order to use them, however, it’s essential to keep accurate records of your incomings and outgoings for the submission of quarterly returns to HMRC.

  • Registration may trigger an audit

Voluntarily registering for VAT may trigger an audit from your local tax authority which will become more aware of your business, and more inclined to check that it’s being run in a reputable manner. An audit is a time-consuming process which you might prefer to avoid.

  • Financial implications

HMRC requires VAT to be paid quarterly, based on income from the previous quarter. So if you register your business for VAT and then suffer a decline in sales, you may struggle to make your VAT payments on time.


No two businesses are the same. Talk to the friendly and professional team at AMR Bookkeeping Solutions to ensure you come up with the right decision on VAT for yours. Call 01892 559480 or get in touch with us via our website.

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