Value Added Tax (VAT)

VAT, or Value Added Tax, is a consumption tax levied in the United Kingdom on goods and services including sales by VAT-registered businesses. VAT is collected at each level of the supply chain on most goods and services, from the manufacturer to the consumer.

Below are some key points about VAT in the UK:

  • VAT Registration: Businesses that have a turnover of more than £85,000 must register for VAT with HMRC. VAT-registered businesses can reclaim VAT paid on their business-related purchases
  • VAT Returns: VAT-registered businesses are required to submit regular VAT returns to HMRC, typically on a quarterly basis. The VAT return includes information about the VAT charged and paid during the period. Businesses either pay the VAT owed to HMRC or claim a refund if they have paid more VAT than they have charged.
  • VAT Rates in the UK: The standard VAT rate in the UK is 20% but there are some goods and services that are eligible for reduced VAT rates such as domestic fuel,  children’s car seats, and energy savings fuel charged at 5% VAT. There are some goods and services that are totally exempt from VAT which are health services, education services, insurance, and a few financial transactions.
  • VAT Thresholds: If your business turnover exceeds £85,000 (threshold) in a  tax year you must register for VAT with HMRC.
  • Flast Rate Scheme FRS: Under the FRS scheme businesses can pay a fixed percentage as VAT payment to HMRC. For more details comment below and we’ll assist you.

Who can register for VAT in the UK?

– any business or individual exceeds the VAT threshold limit of £85,000 must register for VAT 
– if you are importing goods from the EU region and selling to UK consumers you must register for VAT 
– any business can register for VAT voluntarily even if your sales turnover is less than £85,000

Also read: Deregistering from VAT (Value Added Tax)

Who can register for VAT in the UK

What documents are required to register for VAT?

Documents required for VAT registration are: 

– business name 
– business address
– director’s name 
– business details or nature of business
– total business turnover till now
– company registration number
– business bank account details

Is it compulsory to register for VAT?

VAT registration is compulsory if your taxable turnover exceeds the VAT registration threshold or if you expect it to do so within the next 30 days. If you’re engaged in certain activities, such as importing goods from outside the UK, registration may be required regardless of turnover.

Is it compulsory to register for VAT

How to register for a VAT number?

Visit HMRC official website to register for VAT and enter the details required by HMRC like business details, business turnover, director’s name, and address.

How to verify a VAT number?

“Check a UK VAT number” is an HMRC service using which you can check the VAT number of any business by entering the details.

What are the advantages of registering for VAT?

Some advantages of registering for VAT include:

Ability to reclaim VAT paid on business-related purchases and expenses.
Enhanced credibility as a VAT-registered business.
Ability to issue VAT invoices and charge VAT on sales.
Access to certain VAT schemes and benefits, such as the Flat Rate Scheme for smaller businesses.

Also read: Capital gains tax UK

advantages of registering for VAT

What happens if you register for VAT late?

You may have to pay any penalties plus interest on the VAT amount which you should have paid to HMRC earlier. You have to pay VAT amount plus interest plus penalties on VAT amount.

Can I register for VAT as a sole trader?

Yes, sole traders can register for VAT in the UK. If your taxable turnover exceeds the VAT registration threshold or you expect it to do so, you are required to register for VAT, regardless of whether you are a sole trader or operate through a different business structure.

DISCLAIMER: We have written the UK accounting and tax related details for your information only. For professional advice or for any accounting task you require, you may need to speak to a professional accountant near you who can assist you. Please read our disclaimer for more details.