Yes VAT registration means more paperwork, which is often the last thing a small growing business needs. It also means that it’s possible you’ll pay more to HMRC (if you collect more VAT from customers than you pay out).
As professional small business accountants, we understand the apprehension this decision can take, but it’s vital to get it right.
It’s best to look carefully at the specifics of your business and its products when deciding whether to register for VAT, and consul
When do you have to register?
During the course of your business, you and your small business accountants will be keeping a close eye on your revenue. If at any time, your business turnover for the previous 12 months exceeds the current VAT threshold level, which is currently set at £85,000 from 1st April 2022, then your company will become liable to register for VAT.
A big part of our accounting services we provide you with is keeping fully up to date with changes in the laws and rules regarding VAT, it’s important to recognise that this figure is liable to change and we will discuss with you what the threshold is for each financial year so that your business will never fall fowl of the rules and be kept up to date.
Another aspect of VAT rules is that if you expect your company’s turnover to exceed the threshold within the next 30 days, then you should register for VAT.
Your business turnover means the total sum invoiced by your company, not just the profit.
If you want to really get ahead of the game, you are able to register even if your turnover doesn’t meet the threshold, but you fully expect it to. In addition it gives a professional impression to be VAT registered, and you are able to reclaim any VAT you incur (such as computer equipment).
There are always pros and cons to weigh up on any tax changes to your business, and on the plus side, becoming VAT registered means that you are legally able to reclaim any VAT that you are charged when you pay for goods and services.
This VAT is known as ‘input tax, and for some businesses it adds up to more than the VAT you collect from your customers, the ‘output tax’. So simply put, should your input tax be more than the output tax, then you are owed a rebate and you can collect the difference back from HMRC.
Everyone loves a refund from the tax man and as your go to accountants in London, we make sure our clients receive every penny due.
A further often unidentified benefit of registering for VAT is that your business is ready for growth. You don’t have to keep an eye on reaching the threshold and it sends a message to investors and customers that your business is braced to expand.
- Yet, on the down side there is considerably more paperwork, which our accountancy services team can expertly take care of for you.
Different types of VAT scheme
There are 3 standard VAT retail schemes for you to discuss with your accountants in London, and these are:
The Point of Sale Scheme where you identify and record the VAT at the time of sale. The Apportionment Scheme where you buy goods for resale, and finally the Direct Calculation Scheme which enables you to make a small proportion of sales at one VAT rate and the majority at another rate.
The benefits of this are that Instead of accounting for VAT on the date you actually receive payment from clients/customers, you may opt to deal with it on a ‘cash accounting’ basis, i.e. you account for VAT only once you receive payment from your agency or client, rather than on the initial invoice date.
This can be a considerable cash flow bonus for many small businesses.
As with all aspects of VAT there are other elements to be considered, that’s why we have a hugely experienced accounting services team, to guide you through the VAT minefield.
And finally
Before you start your business you need to be aware of the Zero-rated supplies on which the current VAT rate is 0%.
Examples would include things like, foods, books, newspapers, young children’s clothing and shoes.
That’s why you must talk to professional and experienced small business accountants before you do anything, it will save you money, time and a lot of headaches.
