A Comprehensive Guide to Becoming VAT Registered: Steps and Requirements
If you’re a growing business in the UK and your taxable turnover is nearing the VAT registration threshold, it’s advisable to initiate the VAT registration process. Becoming VAT registered can have a significant impact on your business operations, but it doesn’t have to be a daunting process.
In this blog, we’ll walk you through the essential steps you need to take to become VAT registered, ensuring a smooth transition while complying with HMRC regulations.
Step 1: Determine your VAT Registration Threshold
Before proceeding with the VAT registration process, you must first identify whether your taxable turnover exceeds the current VAT registration threshold. As of the date of this blog, the threshold is £85,000. If your turnover over the past 12 months or less is expected to exceed this threshold, it’s time to consider VAT registration.
Step 2: Choose the Appropriate VAT Scheme
Once you’ve established that your taxable turnover exceeds the VAT registration threshold, you’ll need to choose the most suitable VAT scheme for your business. The three primary VAT schemes are:
- Standard VAT Accounting: Under this scheme, you account for VAT on the basis of invoices issued and received. It’s the default scheme for most businesses.
- Cash Accounting VAT – under this scheme, you account for VAT on the payments received and paid, rather than the invoices issued and received as you would with Standard VAT accounting.
- Flat Rate Scheme (FRS): This scheme is beneficial for small businesses with limited input VAT. It allows you to apply a fixed rate percentage to your turnover and pay VAT based on that rate. However, there are restrictions in pace. More information on the Flat Rate Scheme and eligibility can be viewed on gov.uk: https://www.gov.uk/vat-flat-rate-scheme/eligibility
Step 3: Gather Required Information
To complete the VAT registration process, you’ll need the following information:
- Business details, including name, address, and contact information.
- Details of your business activities and a description of the goods or services you provide. Matching this to your company’s house information is recommended.
- Financial information, such as your expected turnover and/or the date your taxable turnover exceeded the VAT threshold.
- Bank account details for direct debits or BACS payments.Opting for a Direct Debit (DD) is advisable, providing an extended payment window of three additional days. For instance, if your payment is due on the 7th of the month, the DD will be processed on the 10th of the month, offering a grace period of 7 to 10 days after the quarter ends. This applies, for example, to the Apr-Jun VAT quarter, where the payment is due on the 7th of August or processed by DD on the 10th of August, considering weekends. Choosing this method not only mitigates the risk of inadvertent oversights but also ensures timely payments, minimising the likelihood of late fees.
- Details of any previous VAT registrations (if applicable).
Step 4: Submit Your VAT Registration Application
You can register for VAT online through the HMRC website or by completing the VAT registration form (VAT1). The online process is generally quicker and more straightforward, allowing you to receive your VAT registration number faster.
Step 5: Await HMRC Confirmation
Once you’ve submitted your VAT registration application, you will receive a confirmation from HMRC. This confirmation will include your VAT registration number, effective date of registration, and any specific instructions or requirements for your chosen VAT scheme.
Step 6: Update Your Accounting System
With your VAT registration number in hand, it’s essential to update your accounting system to account for VAT. Ensure that your invoicing, bookkeeping, and VAT return processes are aligned with the requirements of your chosen VAT scheme.
Step 7: Comply with VAT Reporting Obligations
As a VAT registered business, you will need to submit regular VAT returns to HMRC, typically on a quarterly basis. It’s crucial to accurately report your VAT liability and reclaim any eligible input VAT within the specified timeframes.
Get in touch
Becoming VAT registered is an important step for growing businesses. By following the steps outlined in this guide, you can streamline the VAT registration process and ensure compliance with HMRC regulations.
At CJ Bookkeeping, we specialise in helping small businesses navigate VAT and MTD requirements. Our expert team is here to support you in achieving VAT compliance and optimising your financial operations. To learn more about our services, visit our website or please do get in touch.
Remember, this blog is only intended as a general guide, and individual circumstances may vary. For personalised advice and assistance with VAT registration, get in touch.