Should I be registered for VAT?
If you have already started thinking about VAT then you will know that this can be a tricky question. There are lots of complexities when it comes to VAT depending on what you sell and who you sell it to, but there are some basic principles to be aware of.
If your turnover (the amount you invoice) exceeds £85,000 in any twelve month period then you must register for VAT. If you don’t register when you should then you may face a fine. Once you’ve registered you’ll need to charge VAT on your sales. You’ll also be able to claim back any VAT that you’ve paid to suppliers.
At the end of each VAT period (whether monthly, quarterly or annually, you calculate the difference between the VAT you charged customers and the VAT you paid suppliers and then pay or receive the difference from HMRC. Thankfully if you keep your accounting software up to date the whole process of creating and submitting VAT returns is relatively simple.
Even if your turnover isn’t at the threshold there are other reasons to register for VAT and you can register voluntarily
If your clients or customers are VAT registered then they may prefer to work with VAT registered suppliers as they can claim the VAT back on the things they buy from you.
If the things you sell don’t require VAT to be charged (e.g. children's clothes) but you pay VAT on some of your expenses, you may benefit from being VAT registered so you can claim back the VAT you pay.
It is a very good idea to get some professional advice (from a trustworthy lady with a bob) before making this decision