If your turnover is more than £90,000 in the last 12 months, no matter when your year end is, you must register for VAT, so if that is you, then we’ve answered the question!
There are some types of businesses that are exempt such as financial advisers and education providers to name some, but if you’re not exempt then you must tell HMRC within 30 days of the end of the month you went over the limit.
You can register voluntarily if your turnover is below £90,000, but why would you?
If all of your customers are VAT registered themselves, so can reclaim the VAT you charge, it may make sense to register as you’ll be able to claim VAT back on expenditure. If, however, you are say, a plumber working for the person on the street, then registering for VAT may make you less competitive.
Even if you are forced to register there are many schemes available that might soften the blow such as the flat rate scheme, or cash accounting. Annual accounting also is available for smaller businesses, which may make budgeting easier. The margin scheme is also popular for sellers of second hand goods.
The important thing to remember, which has caught out some of my clients, is the above £90,000 limit is based on the last 12 months on a rolling basis, not your year end results. It is therefore vital you monitor your turnover closely as HMRC will levy penalties and expect VAT on the sales you’ve made between the date you should have registered and the date you eventually registered, which can add up!
If you’re not sure if you need to register, or if voluntary registration would be beneficial feel free to drop me a line.