New VAT registration tool released by HMRC

HMRC, News, VAT,

Many small businesses restrict their turnover to avoid the need to register for VAT, often for several years. This is predominately through fear of the implications registration will have for the extra administrative burden, and the negative impact the increased costs may have on their sales. As a result, HMRC have released a new tool designed to help businesses explore the impact VAT registration would have on their business.

When do you have to register for VAT?

VAT registration becomes mandatory if:

  • your total taxable turnover exceeds £90,000 over the previous 12 months.
  • you expect your taxable turnover to go over £90,000 in the next 30 days.
  • you’re based outside the UK and supply goods and services to the UK.

Taxable turnover refers to the total value of everything you sell except for anything that is exempt from VAT.

It’s also possible to register for VAT voluntarily even if your annual taxable turnover is below £90,000. Some businesses prefer to register as they feel it offers an extra level of credibility as they may be seen as a larger entity.

What does it mean to your customers?

If the majority of your customers are VAT registered then there is no real impact to them, as they can claim back any VAT you charge. In this case, voluntary VAT registration can be worthwhile so you can also claim back VAT on purchases you make.

If the majority of your customers are individuals, the impact of VAT registration will be more noticeable, as you’ll need to add VAT at the current rate to your prices and pay that amount over to HMRC.

What does the new tool do?

The new HMRC tool can help you to estimate what VAT might be owed or reclaimed by your business if you were to register for VAT. You can use the tool to explore multiple ‘what-if’ scenarios and compare various situations.

To use the tool, please visit this link.

As always, if you’re unsure whether you should choose to register or are approaching the VAT threshold and are wary of the process, please get in touch. We’ve taken many businesses through the process over many years and can help you make the decision of whether or when to register and then guide you through the process.

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