Step By Step Guide TO UK VAT Registration Process | How to apply for VAT registration in UK: As your business grows, one of the things you need to be aware of is Value Added Tax (VAT). Understanding VAT and what it means for your business, as well as being clear on the VAT threshold, is important. If VAT registration is on the cards for your business, you can register for VAT online.
Read this article to learn about VAT and how to register for it, discover the different VAT schemes that are available and understand how Making Tax Digital is making an impact.
What is VAT
VAT is a “consumption tax” – a tax on goods and services that people consume, in other words. It is an indirect tax because businesses that are VAT registered and whose taxable turnover exceeds the VAT limit (currently £85,000) collect it on behalf of the government.
Since January 2011, the VAT rate for most goods and services in the UK has been 20%.
Like children’s clothing and footwear, attract zero rate for VAT. It is worth noting that the VAT limit is subject to change taking into account factors such as inflation.
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Who needs to register for VAT?
Some businesses have to register for VAT, some aren’t allowed to, and others can choose.
Who must register for VAT: Businesses with an annual taxable turnover of more than £85,000. You may be fined if you don’t register.
Who is not allowed to register for VAT: Businesses that sell only VAT-exempt goods and services.
Who can choose to register for VAT: Businesses with an annual taxable turnover of less than £85,000.
Benefits of VAT Registration
Once you are VAT registered, you do not pay VAT on business expenses. You will still be charged a VAT-inclusive price when you make a purchase, but you can claim that money when you file your return with HMRC.
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When to register for VAT
If your VAT-taxable turnover is more than £82,000 a year – by which we mean the turnover of all your goods and services that are eligible for VAT – you must register with HRMC. You can also register if your value is under this (unless all your services or goods are VAT-exempt), but this is optional.
In this case, the period of a year is defined as any rolling 12 month period – not a fixed period. So if your turnover tops the threshold within 12 months, regardless of when the 12 months started, you’re required to register.
When calculating the turnover, you also need to include:
- Goods you hired or loaned to customers
- Business goods used for personal reasons
- Goods that were part-exchanged, or given as gifts
- Building work over £100,000 that your business did for itself (so you supplied yourself with a service)
- Services you received from businesses in other countries that you had to reverse charge.
Documents Required for UK VAT Registration Process
To register you’ll need the following:
- Your National Insurance number, or unique taxpayer’s reference .
- Certificate of incorporation, or your incorporation details.
- Details of all associated businesses within the last two years.
- Business bank account details.
- If you’re acquiring another business, its details too.
How to register for VAT online
Are you at the stage with your business where you’re thinking “I need to register my business with HMRC for VAT”? If so, the process to register your business for VAT is relatively simple.
You can register for VAT online, although it’s also possible to use a VAT1 paper form to register if you need to.
One thing worth noting is it can take around a month or even longer to process a VAT application.
Steps for UK VAT Registration Process
- Go to online portal
- Sign up for a new Government Gateway account.
- After successful sign-up, start your registration process as guided on the HMRC website.
- Enter relevant details and apply for VAT registration.
- On successful submission, VAT Registration Number will be provided to the user.
The sign-up details will be used as your login and password. A user needs to verify the email address and other details as and when required. Businesses will be notified by email and SMS as soon as your VAT registration number is generated.
