VAT registration details - what you need to know
VAT: compulsory VAT registration
- VAT registration compulsory
- The current compulsory VAT registration threshold figure from is sales in excess of in any twelve month period.
- You disregard sales which are:
- Outside the scope of VAT.
- Exempt VAT.
- So sales Outside the scope of VAT and exempt VAT will not themselves trigger compulsory VAT registration.
- Outside the scope of VAT and exempt VAT are different from each other and also different from zero rated VAT.
- You do not ignore zero rated.
- If you purchase services from EU suppliers
- You need to include purchase of services from EU suppliers under Reverse charge VAT for services from other EU countries regulations.
- The effect of the reverse charge is that a taxable supply is deemed to be made by the recipient of the service in the UK.
- More simply expressed, these purchases of services are treated as your sales.
- Date of VAT registration:
- If you exceed the annual total sales threshold this month, the date of VAT compulsory registration date will be the first of the month after next.
- You can apply for VAT exemption, exemption from VAT registration, if most of your sales are zero rated.
- Change of ownership:
- If you purchase a business with past sales in excess of £ per year this will be a compulsory VAT registration.
- You can apply, together with the other party, to transfer the old VAT number to a new business owner but you must also submit a new application to register for VAT.
- You may be changing your own self employed, sole trader, business into a limited company in which case you apply as both parties.
- If you take over share ownership of a VAT registered limited company there will be no change of ownership for VAT purposes. You carry on with the same VAT number.
- Late filing of VAT returns or late payment of VAT will result in penalties and interest.
- Penalties are on an increasing percentage basis for repeated lateness; from 2% to 15% of VAT payable.
- If you apply for registration after the compulsory VAT registration date there could be an accumulation of interest and penalties.
- HM Revenue & Customs routinely check that compulsory registration for VAT has been applied from the correct date.
- If you are in any doubt about this please let us have your up to date:
- Sales invoice data.
- Bank statements.
- From the start of the business;
- or from whenever you know that you were below the limit.
- The compulsory VAT registration threshold figure was less in previous years.
- e.g. .
- Do this now; you should not wait until annual accounts are prepared.
- The threshold applies to ANY ANY ANY twelve month period not just once at year end.
VAT: registration exception
- You can apply for a VAT registration exception
- If your taxable turnover goes over the threshold temporarily and
- You believe your VAT taxable turnover wont go over the de-registration threshold of in the next 12 months
- HMRC will consider your 'exception' and
- Write confirming if you get a VAT registration exception.
- If not, theyll register you for VAT.
VAT: Late VAT registration penalties
- As a precentage of VAT due:
- Not more than 9 months late 5%
- 9 months to 18 months late 10%
- More than 18 months late. 15%
- Minimum penalty of 50.
Non-established taxable person NETP
- If you supply from outside EU to UK, typically by internet sales, you need to register from the date of the first sale in UK under Non-established taxable person NETP VAT regulations.
- Registering and trading as a UK company will mean that you are not eligible for Non-established taxable person NETP VAT regulations because a UK company is established in UK.
- But - you will also probably not be able to register under normal procedures because you will not have a valid UK trading address.
- Attributes of a UK trading address:
- A valid UK address which is not a virtual office or your accountants office and
- Someone from the business is routinely at that address throughout the year and
- Control of the business takes place at that address and
- Records of the business will be available at the address for H M Revenue & Customs inspection.
- You need to appoint an agent or employee to act for VAT on your behalf in UK and send a copy of the appointment to HM Revenue & Customs - VAT.
Letter to authorise an agent or employee to act in VAT matters
11.7 Letter to authorise an agent or employee to act in VAT matters - suggested wording
(Insert principal’s name)
of (insert principal’s address)
hereby appoints (insert name of UK agent or employee)
of (insert address of UK agent or employee)
to act as agent for the purpose of dealing with all their legal obligations in respect of VAT.
This letter authorises the above-named agent to submit VAT returns and any other document needed for the purpose of enabling the agent or employee to comply with the VAT obligations of the principal.
Signed (insert principal’s signature)
Date (insert date)
EU trader - Distance Sales into the UK - Goods
- Typically applies to internet sales of goods but not services.
- If you are:
- A trader of goods.
- VAT registered in an EU country outside UK.
- You must register in UK when your sales into UK exceed £70,000.
- In any twelve month period.
EU trader - Sales into the UK - Services
- Applies to sales of services to non VAT registered customers in UK.
- Because of the reverse charge regulations for services, the UK non VAT registered customer needs to add services purchased from other EU countries to their sales in order to determine whether they should be UK VAT registered under VAT: compulsory VAT registration. See above .
- The EU trader only has to comply with the VAT regulations in his own country.
VAT: voluntary VAT registration
- VAT registration voluntary
- You may apply for voluntary VAT registration at anytime before reaching the threshold limit.
- If all of your sales are exempt VAT you will not be able to apply for VAT registration.
- If some of your sales are exempt VAT, you can register for VAT but VAT on costs attributable to exempt VAT sales cannot be claimed; some VAT on costs will need to be claimed pro-rata.
- Paying voluntary VAT is beneficial if all of your customers are VAT registered. You can claim VAT applicable to your costs.
- The downside is that you need to do quarterly VAT returns.
- Voluntary registration for VAT may be beneficial to apply for the flat rate scheme in which you collect on your sales and pay to H M Revenue & Customs at a lower rate on sales but do not claim actual VAT on purchases except assets costing over for which VAT may still be claimed.
How to do compulsory VAT registration or voluntary VAT registration.
To Register for VAT you need:
- Trading address - see attributes of a UK trading address above.
- A virtual office will not be accepted as a trading address.
- Actual or expected date of starting to trade.
- If you are intending to trade from serviced offices this may cause HM Revenue & Customs to scrutinize the application more carefully.
- Evidence of trading: if you have not made any sales at the date of application you may need to show evidence of intention to trade such as purchases, orders, premises lease etc.
- Details of your business bank account.
- Business bank account details can be provided after registration but VAT repayments go to the business bank account and are most likely on the first VAT return.
See our guidance on how to complete Your first VAT return
- If you are continuing to trade as unregistered after deregistration:
- You must have been VAT registered for one year.
- You need to believe and declare that your VAT taxable turnover won't go over the de-registration threshold of in the following 12 months.
- You decided whether you want to deregister.
- Complete form VAT 7 Application to cancel your VAT Registration.
- Form VAT 7 needs to be sent by post.
- HM Revenue & Customs then either confirm the date which you have chosen or provide an alternative date.
- A “Final” VAT return is set up by HM Revenue & Customs for completion, online, up to the final date of deregistration.
- You need to enter on the final return:
- Usual trading information - Sales and Purchases.
- Details of anything on hand at the date of deregistration on which VAT has been claimed.
- Typically this is the valuation at deregistration date of:
- Trading stock.
- Commercial vehicles.
- Computer and other equipment.
- You include these in the final VAT return as saies at valuation with VAT added.
- You charge yourself the VAT on these items as being 'sold' to yourself.