Once your VAT taxable turnover reaches £85,000 you must become VAT registered. Your VAT taxable turnover is all of your sales which are not exempt from VAT. You can also decide to register for VAT voluntarily if you believe that it would be more beneficial to your business. In this blog we look at the pros and cons for voluntarily registering for VAT before you hit the threshold.

Pros

Once you register for VAT you now have to apply VAT to all of your sales unless they are exempt of course. This also means that anything you buy which has VAT, you can reclaim back. This is handy if you purchase a lot of goods or services which have VAT added to them.

Being VAT registered can be good for your credibility. It shows that you are serious about your business and that you are professional. Many businesses rule out using other companies who are not VAT registered as they see them as too small to meet their requirements.

If you decide to register for VAT voluntarily you can claim the VAT back on purchases for the last 4 years. Of course you need to keep proof of your purchases in order to do this. 

Cons

If the majority of your suppliers are not VAT registered it may not make business sense for you to register for VAT as you will only have a minimal amount you can reclaim. The amount of VAT you reclaim must be more than the amount you charge in order for it to be beneficial to your business. 

There is a lot more business admin to contend with when you’re VAT registered so it will give you more work to do, unless you have a bookkeeper looking after this for you of course. 

Each business needs to assess the pros and cons and what this means to them. No business is the same. It mostly depends on the amount of transactions you currently have which contain VAT and if it’s worthwhile for your business.

We highly recommend that if you do start to charge VAT that you put this money aside separately ready to pay your VAT bill.

If you need some advice please get in touch.