Many companies question whether they should register for VAT or not. In this blog, I discuss what VAT is as the benefits and drawbacks of being registered. VAT is a minefield and raises many questions, so I have put this blog together to help you decide whether or not you should register for VAT.
What kind of businesses can apply for VAT registered?
If you are business and expect your turnover to exceed the VAT threshold of £85,000 you must register for VAT. Smaller businesses who do not expect to exceed the threshold still have the ability to register for VAT.
If your business is a B2B your clients will be able to reclaim any VAT you charge them when they complete their VAT returns. It also means expenses you incur will also become 20% cheaper because you can reclaim the VAT, you can claim VAT back on meeting rooms, VOIP phones, stationary.
As a business you can apply for VAT at any point, registration varies for businesses depending on turnover and types of clients.
What are the obligations of being VAT registered?
If you are a VAT registered business, you must keep all your sales invoices and they must include a VAT number and registered address in the set VAT format. All purchase and expense invoice’s regardless to whether they include VAT or not must be kept for a minimum of 6 years.
Making Tax Digital (MTD) means all VAT registered business will have to keep their financials in an electronic format. This can be done by using bridging software that syncs with the HMRC portal. This must be done by the 1 April 2019.
The benefits of VAT registration
- Smaller businesses are perceived to be bigger, it is a misconception that small businesses are not VAT registered
- Cost reduction, you can claim the 20% VAT back so in turn items are 20% cheaper
- There are different types of VAT schemes that can help save money for example if you are a sole trader make VAT returns under the flat rate scheme means you will save more money
The drawbacks of VAT registration
- You have to keep detailed accounting records
- VAT registration can have a negative impact on cash flow if you aren’t on the correct scheme.
- Quarterly VAT returns add to your workloads, they mean your financial information also has to be more organised for you to file the return on time.
If you would like assistance choosing the correct VAT scheme to suit your business or if you need assistance with quarterly VAT reporting contact us on 01295 477 250 alternatively you can email firstname.lastname@example.org.