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It’s time – your business is earning enough to qualify for Value Added Tax (VAT). This means you need to know how to register for VAT and what documents, processes and information you need to ensure your VAT registration is as easy and efficient as possible.

Before we dive into the nitty gritty of registering for VAT, here’s a quick reminder of what VAT is and how it works:

VAT is a tax placed on almost all goods and services sold by a business to
other businesses and consumers, and the amount of VAT you pay is dependent on
how much it costs, the sector you’re in, and the type of VAT your business is registered for.

If you’d like to know more about VAT and how to pay it online, visit our blog here. Now, let’s dive into how to register for VAT and what processes you must follow to get it right the first time.

Who Needs to Register for VAT?

The point at which your company becomes eligible for paying VAT is determined by the income your business makes over a 12-month period. If your taxable turnover is more than £85,000, you must register and have exceeded the VAT threshold.

If you don’t register for VAT and your turnover exceeds the VAT threshold determined by HMRC, you are liable for a fine from the tax authority, which could potentially place your business at risk. That said, if you wanted to register for VAT without that level of turnover, you are allowed to do so – the threshold is only there to mark the starting point for VAT.

Note: You cannot register for VAT if your company sells VAT-exempt products and services such as insurance, finance, credit facilities, education, training, subscriptions, charity initiatives, and certain commercial property activities.

The Importance of Registering for VAT Online

Registering for VAT online is easy and relatively painless. The process has been designed to make your move towards a VAT-paying business as simple as possible. While some companies can’t register online (more on that later), those that can do the online application will find that it makes their admin quite a bit less intensive.

You won’t need to fill in a lot of forms by hand, or try and figure out which forms you will need for your specific type of business, or spend time worrying about posting the documents. Everything is included in the portal. Plus, if you register online, you will receive your nine-digit VAT number and login details digitally and in the post, making it much easier to manage your paperwork.

Registering for VAT is very beneficial for your business. You will have any VAT you’ve spent on business items and expenses reimbursed because you can claim it back when you file a VAT return. There is also a sense of credibility and reputational value that comes with being VAT registered – other companies and customers attribute this to a solid reputation, reliable income flow, and trusted service delivery.

Detailed Steps for VAT Registration Online

These steps take you through registering for VAT for the first time:

• Start by registering online with HMRC. You will need your Government Gateway User ID and Password to start the process. If you don’t have these, you can create a new sign-in as a new user. If you’ve lost or forgotten your password or Government Gateway User ID, you can follow a clear online walkthrough to help you get a new one. If you cannot register for VAT online and need to do so by post, follow these detailed instructions on how to register for VAT by post here.
• Prepare your paperwork. Have your National Insurance (NI) number, Unique Taxpayer Reference (UTR), and business bank account details ready. You will also need all details of previously owned businesses you’ve had over the past two years and records of sale if you purchased your current business.
• Your registration process is step-by-step and straightforward and will help you enter your business details while creating an online VAT account that will become one of your most invaluable resources. You can use this online account to pay your VAT, assess your status, file returns, etc.
• If you aren’t comfortable registering for VAT, you can use an accredited agent to handle the process. These accountants will run the VAT application for you and help you submit your VAT returns, ensure your payments are on time, ensure your VAT amounts are correct, and deal with any issues you may have with HMRC on your behalf.
• Some businesses and situations may mean that you cannot register for VAT online. There are exemption schemes that have different VAT rules that apply to specific sectors or types of business. If this applies to you, you must register by post using a particular VAT1 form. Once you have followed the postal requirements and received your VAT number, you can then sign up for an online account.
• Once you have completed your VAT registration, you will receive a nine-digit VAT number that has to be included on every invoice you make, and that will be used to track your VAT progress.
• When you have received your VAT number and registration confirmation, you need to start charging VAT and reclaiming VAT from products or services you’ve bought since you registered. You cannot include VAT on your invoices until you’ve received your VAT number.
• You can expect to receive your VAT Certificate of Registration and other important paperwork within 30 days of your application. However, the wait time is often much less than that, with many companies receiving all their paperwork and details in just over a week. Then you can use all the information on the certificate and in the provided paperwork to log into your HMRC VAT portal, complete your registration, and start trading as a VAT-registered business.

Key Considerations When Registering for VAT Online

You will need a reliable and trusted VAT accounting software solution to help you manage your VAT payments, data, and information. There’s no point in putting yourself through the pain if you can simply use a trusted software solution to handle all the tricky bits for you. You must use one of the accredited software solutions to submit your return. There is a list of the different software platforms allowed by HMRC here. Almost all VAT registered companies require this, and the software provider you have chosen will include a lot of advice and support to help you submit your return properly every month and keep you up to date.

Another important consideration is your VAT accounting scheme. When you’re registering for your VAT, you’ll be asked to choose a particular VAT accounting scheme, and HMRC will use this to calculate the amount of VAT you owe or how much it has to refund you.

There are several different types of VAT accounting schemes:

• Annual VAT accounting lets you submit a VAT return once a year with quarterly payments based on estimates that are, in turn, based on previous returns.
• Flat-rate VAT accounting allows some smaller companies to bypass VAT accounting and pay a percentage of their turnover.
• The cash accounting scheme is built on the basis that you have charged VAT when making cash transactions, and you will then pay your VAT accordingly.
• Standard VAT accounting asks that you submit a VAT return every month based on the VAT you have collected and paid and then submit VAT payments to HMRC every three months.

It is advisable to work with an accountant when stepping into VAT management as they will have extensive expertise and can help you choose the VAT scheme, manage your returns and software, and ensure you are always up to date with your payments.

Don’t forget – one of the most important considerations when registering for VAT is meticulous record-keeping. You need to track your payments, your invoicing, the amounts you have charged for VAT, what you have paid in VAT, and everything in between. Save everything, have back-ups, and ensure your paperwork is perfect or you can run the risk of fines. 

Most companies registering for VAT in 2023 need to sign up for Making Tax Digital (MTD) for VAT which asks you to submit a significant number of records digitally. This means you must ensure your paperwork complies with MTD to ensure you don’t have to pay a penalty.

The Impact and Importance of VAT Registration

Why register for VAT? Other than the benefits highlighted earlier – it strengthens your reputation and allows you to be reimbursed for any VAT payments you’ve made. It does however put pressure on you to maintain your paperwork correctly. While this may feel boring and takes up time, it keeps your business on the straight and narrow. You’ll be immensely grateful if you ever discover a problem because finding information will be easy, and resolving it will be quick. Plus you can then take advantage of intelligent technologies and solutions designed to make your life easier for managing VAT.

A case in point is Blue dot. We have developed VATBox as a smart enterprise VAT management solution that will help you to identify and calculate any eligible and qualified VAT spend so you can optimise, manage and analyse your company’s global and local VAT recovery processes. We also have the Blue dot calculator to help you asses recoverable VAT hidden in your employee spend and help you most benefit from your VAT registration and processes.