Understanding VAT (Part 3)
CA Radhika Lohiya ASA
Chartered Accountant | Australian Outsource Accounting | Virtual CFO Services
Registration
Registering for VAT tells HMRC that your business will now start making regular VAT submissions.
You must register for VAT if:
12-month period
For VAT purposes, this isn’t a calendar or financial or tax year – it’s the rolling 12-month period leading up to this point in time. So, if you’re near the threshold you’ll need to keep a careful eye on your figures. If you go over the threshold in any 12-month period, you must?register for VAT.
Effective date of registration
This is the date you went over the registration threshold or?requested voluntary registration.
Exempt goods and services
These are supplies and services that you can’t charge VAT on. For example, insurance, postage stamps, or health services provided by doctors.
Out of scope
This refers to goods and services which are outside the VAT tax system, that you can’t charge or?reclaim VAT?on. Charges outside the scope of VAT typically include charges made by the government, such as MOT testing or the London congestion charge. Another typical example is the wages that you pay to employees.
Registration exception
You can apply for a registration exception if your taxable turnover only goes over the threshold temporarily. Write to HMRC with evidence showing why you believe your VAT taxable turnover won’t go over the de-registration threshold of £83,000 in the next 12 months. HMRC will either confirm your exception or register you for VAT.
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Registration threshold
The taxable turnover figure that makes your business liable for compulsory VAT registration. The current threshold is £85,000. It usually increases on 1 April each year.
VAT number
This is the unique reference number which identifies your VAT registration with HMRC. You’ll need to include your VAT reference number on every invoice.
VAT rate
This is the rate of VAT which applies to goods and services.
Voluntary registration
Some businesses find it useful to register for VAT even though their turnover is less than registration threshold. This is known as?making a voluntary registration. There can be several reasons for doing this, including being more tax efficient.
Taxable turnover
VAT taxable turnover is the total value of your UK sales that aren’t VAT exempt, including:
Zero-rated items
Zero-rated means that the goods are still VAT-taxable but the rate of VAT you must charge your customers is 0%. You still have to record them in your VAT accounts and report them to HMRC. Examples include children’s clothes and shoes, or motorcycle helmets.