When do I need to register for VAT?

Date posted: 9th Feb 2023

The turnover threshold, that governs whether businesses should register for VAT, is currently £85,000.

At the 2022 Autumn Statement, it was confirmed that the threshold would remain at this level until at least 31 March 2026. As businesses increase prices due to inflation, this is likely to see more businesses caught by the VAT threshold and subsequently required to charge VAT on to customers.

Ultimately, businesses are required to register for VAT if they meet either of the following two conditions:

  1. At the end of the month, the turnover made in the past 12 months (or less) is more than £85,000; or
  2. At any point, there are reasonable grounds to believe the turnover to be made in the following 30 days will exceed £85,000.

Therefore businesses need to continually monitor their turnover, to ascertain whether they have a compulsory requirement to register for VAT. There may be exemptions if the turnover only goes over the threshold as a one-off but advice will be required.

A business can voluntarily register for VAT – this could be beneficial if the business incurs significant expenditure and it can therefore recover the VAT. Those businesses need to be aware that they will have to increase their prices but if their customers are other businesses, the likelihood is that the business customer will be registered for VAT too and can therefore recover the VAT. Any business dealing with private customers will need to make a commercial decision about how much of the VAT to pass on, in their prices.

Finally, any business registered for VAT will need to keep digital records and make VAT submissions to HMRC electronically under the Making Tax Digital provisions.

If you have any queries regarding VAT compliance or Making Tax Digital record keeping, please give us a call.


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