VAT (Value Added Tax) can be intimidating for all small business owners already dealing with tons of paperwork and other rules of HMRC. VAT is charged on almost all goods and services in the United Kingdom. The sales on which VAT is applicable are known as VATable sales or taxable sales. However, there is no VAT charged on the sale of some goods and services.
Such sales do not come under taxable sales. Companies need to register their businesses only when their taxable sales reach the threshold set by the HMRC (Her Majesty’s Revenue and Customs), i.e., £85,000. Now that you have some basic understanding of VAT let’s discuss the detailed process of VAT registration in this quick guide.
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How to Register for VAT
Here’s the number one doubt for most small business owners who have just started in the business ecosystem. The registration process for VAT is pretty much the same as any registration process. You can register your business for VAT in two different ways. The first is to register online. The second method for VAT registration is by filling out the VAT1 paper form. You may choose any method based on your preference. Also, you can choose an agency that does the VAT registration for you. You can find many hassle free vat registration services in UK. Once you register your business for VAT, you must wait for the HMRC to accept your application. Once received, the HMRC will send you a certificate with your company’s unique VAT reference number.
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When to Register for VAT
Now that you know how to register for VAT, it’s better to understand when you need to register your company for VAT. As mentioned above, if your company’s taxable sales reach the threshold of £85,000 in one year or are about to reach the threshold in the next 30 days, you must register for VAT. This type of registration is often known as compulsory registration. There is also voluntary registration, which means you can register for VAT even before reaching the threshold set by the HMRC for taxable sales. Doing so is also beneficial for your business as you can claim the input VAT on the costs incurred. That makes for a better cash flow. However, voluntary VAT registration may not be ideal for businesses whose customers are the general public or small businesses without VAT registration. Because in that case, your customers would have to pay VAT while buying from you, which they will not be able to claim back.
Things Required for VAT Registration
Here’s a checklist of things you’ll need for the VAT registration of your business:
- The contact details of your business
- Unique tax reference number
- Details of your nature of business and company’s turnover
- Bank account details.
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Registering for VAT online
If you wish to go for online VAT registration, you would require a government gateway ID, a series of 12 digits. You need to use this government gateway ID along with the password to access the HMRC portal. You get the government gateway ID upon successful registration on the HMRC website. We shall mention the process for obtaining a government gateway ID.
Steps for Obtaining a Government Gateway ID and VAT Registration
- Visit the Register for HMRC taxes webpage, then select the suitable option and click ‘next.’
- Once you reach the final page, click on the option “create an account for me.”
- Upon entering the required details on this page, you will get your Government Gateway ID. It’s better to print the PDF or note down your government gateway user ID, as losing it may lead to a lot of hassle in the future.
- Now go back to the sign-in page and log in using your government gateway user ID and password.
- Once logged in, you will find a “Get another tax, duty or scheme” section
- Select ‘VAT’ and proceed with the online application by filling in all the necessary information. You would also need to attach scanned copies of the required documents, so keep them handy.
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Registering for VAT Offline Using the VAT V1 Form
While almost all businesses in the UK can register for VAT online, there may be some instances where companies require to follow the offline VAT registration process, such as the following.
- When applying for a VAT registration exemption
- When a company joins the Agricultural Flatrate Scheme
- Single user registering multiple businesses under separate VAT numbers
So, if you cannot complete the VAT registration online, you may obtain and fill out the VAT V1 form and send it to the Her Majesty’s Revenue and Customs (HMRC) via post.
What Happens after VAT Registration
So you have successfully completed your VAT registration process and wondering what happens next? As mentioned above, you would receive a certificate from the HMRC with a unique VAT reference number for your company. So, upon successful VAT registration of the company, you need to charge VAT to the customers on all taxable sales. The VAT your business charges customers is known as output VAT. Whereas your business will also have to pay VAT to the suppliers, and you can claim some of that VAT. The VAT that you reclaim from the HMRC is known as input VAT. You must also file a VAT return to declare how much VAT you have charged your customers and the amount of VAT you have reclaimed as input VAT. The VAT return depicts your output VAT – input VAT. The difference between both output and input VAT would be the VAT amount you need to pay to the HMRC. However, if the input VAT is higher than the output VAT, then the HMRC would issue a refund.
Final Thoughts
That sums up the detailed VAT registration process for your company in the UK. Hopefully, the article gave you a better insight into the VAT registration process and might help you. The Government Gateway ID is one of the crucial elements of your VAT registration if you opt for the online method. So, ensure to store it in a safe place so you don’t lose it, especially around deadlines. If the entire VAT registration process seems overwhelming to you, it’s better to consult an agency that does the VAT registration for businesses.
