• When and how do I register for VAT

When and how do I register for VAT

When and how do I register for VAT
Last Edited: 11/Dec/2018

Some areas of VAT are not always the simplest to understand but registration in most cases is normally fairly straight forward and this is a basic guide to help you understand if you need to be registered. For the vast majority of businesses, when VAT registration is compulsory or becomes beneficial boils down to two main factors.... turnover and type of trade.

Compulsory VAT registration

Compulsory registration occurs either when your actual taxable turnover in the last 12 months exceeds the registration threshold specified by HM Revenue & Customs (currently £85,000 at the time of writing), or if you expect it to be exceeded in the next 30 days alone.

If you go over at any in the last 12 months, you are not expected to register from that exact day. Instead, you will have 30 days to apply and the registration date will the first day of the second month thereafter. For example, if you reach the limit mid October, you will required to register as of 1st December.

If you were to suddenly land that big contract which means you realise you will hit the limit in the next 30 days then that realisation date is your date of registration and again you have 30 days to apply.

You might also need to register in some other cases, depending on the kinds of goods or services you sell and where you sell them.

Penalties for late registration can be imposed so you should check your turnover regularly and remember it is calculated on a rolling 12 months.

If you do become liable to register, be aware that there are schemes available such as Flat Rate, Cash Accounting and Annual Accounting that are specifically designed to help smaller businesses manage cash flow and the administration involved. In some circumstances, you may also be able to recover VAT paid on some costs prior to registration.

Voluntary VAT registration

In some instances, it can be beneficial for a business to register for VAT even if it doesn't reach the compulsory registration threshold. This normally occurs either when the supplies it makes are not charged at the standard 20% rate but the supplies it receives are.

For example, a building company working on new build projects will charge VAT at 0% but the materials it buys and a lot of the business running costs will have included VAT at 20% which results in regular repayment claims on their VAT returns. Similarly, most or all of a bakery's sales will also fall within the 0% rating but it can reclaim VAT on overheads where applicable.

Of course, you should also consider the administration time and costs incurred with being VAT registered such as bookkeepers/accountants fees or whether you have the capacity/knowledge to do this yourself.


In all scenarios above it is important to note that this does not cover every single aspect of VAT registration and so you should always consult HMRC guidance or speak to your accountant first.