Value added tax (VAT) is a tax which is applied to most of the products and services in the UK. It is normally charged on those goods and services which are imported from countries outside European Union (EU). If you have a VAT registered company, you can reclaim for VAT in certain situations. If your business is not VAT registered, you will not get any VAT refund on your products and services. Reclaiming is the main reason due to which most of the companies prefer to register for VAT. This registration is whether done on compulsory grounds or voluntarily.
Voluntary VAT registration:
The specific turnover of your company will decide whether you should get your VAT registration or not? If your business has a turnover less than the amount specified by the government, you still have the opportunity to get it registered on a voluntary basis. Several advantages of getting a VAT registration on a voluntary basis includes the following:
• VAT registered businesses are able to reclaim for VAT on several goods and services purchased from different businesses.
• By registering for VAT, small companies may represent themselves as a big ones in market. An established state of a company attracts more customers, clients and lenders.
• Every VAT registered company has a specific number provided by the government. This number is then displayed on invoices, pay slips and other items. Again, this will be appealing to most of the customers and lenders.
• The amount of VAT can be applied on almost all of the products or services offered by a company.
Compulsory VAT registration:
According to the law, if a company’s total turnover for the last 12-months exceeds VAT registration threshold, it should get registered. Currently, the threshold amount in the UK is £81,000. Variations in this amount is seen every year. So, before you start the process of registering your business for VAT, check for the latest VAT registration amount.
Apart from this reason, a company should also get VAT registered if it takes over another company which is already registered for VAT. There is another obligation, if you think that your business will exceed VAT registration threshold in the next 30 days, you should register for VAT.
Delay in the registration process will lead a company towards late registration penalties. A temporary increase in the VAT threshold does not make registration compulsory, you can ask for an exception from HMRC.
You can get your company VAT registered in two ways. The first one is online registration i.e. you have to apply online for registration. The second way is applying by post. Send an application with required documents to apply for VAT.
There are certain situations in which companies are not eligible for getting registration for VAT. For example, if a business is not fulfilling the standard as stated by HMRC, it cannot get VAT registered. Business is also not eligible to apply for registration if it sells only those products and services on which VAT is not applied.