When considering going VAT registered, many businesses wonder how to register for VAT online. The process used to be a bit trickier but has become increasingly simpler over the years. Still, there are still several steps and tips you need to know.
VAT receipts were worth more than £100 billion in 2020/21, so there are also a few rules and regulations. Finally, VAT registration brings its duties, benefits, and some potential downsides. In this blog, we’ll explore the VAT registration online process.
What exactly is VAT?
Value Added Tax (VAT) is a business tax that’s paid by HM Revenue and Customs (HMRC). VAT is what’s known as a consumption tax businesses charge VAT on their goods and services, pay VAT on purchases, and then make VAT payments through their VAT returns to HMRC.
Businesses only have to charge and collect VAT after their turnover exceeds a certain threshold. Currently, that threshold is £85,000 per year. Above this, businesses must register for VAT and add their applicable VAT rate to their goods and services.
Are there different VAT schemes?
When going VAT registered, you’ll be asked which VAT accounting scheme you’ll use. HMRC will use this information to calculate the VAT you owe.
For most businesses, standard VAT accounting should apply. This means charging VAT on each sale and paying it on purchases, then submitting a quarterly VAT return. There are, though, a few different VAT schemes:
- Annual accounting scheme: make VAT payments annually instead of quarterly
- Flat rate scheme: smaller businesses can pay a different percentage of VAT collected without accounting for VAT paid on purchases
- Cash accounting scheme: this scheme allows businesses to account for VAT when it’s paid rather than invoiced.
These schemes can be valuable for specific businesses under various circumstances, as well as some other more niche VAT accounting schemes. So, when should you register?
When should I register for VAT?
VAT registration becomes compulsory once your business has turned over £85,000 or more in the previous 12 months. This is known as the VAT registration threshold. Businesses approaching this threshold should monitor their previous 12 months’ turnover monthly.
Once you’ve crossed the threshold, you should register for VAT online. Depending on when you register for VAT, your return and payment dates will probably be different from other deadlines, such as corporation tax payments for limited companies.
Voluntary VAT registration
Many small businesses also opt for voluntary VAT registration. This is sometimes a good option for new businesses aiming to cross the VAT threshold in the near future, or simply for those who wish to charge VAT even below £85,000 turnover.
Why would they do this? The advantages sometimes outweigh the added work that VAT registration can bring. Businesses considering voluntary VAT registration should bear in mind that deregistration can only be done under specific circumstances.
Should I register for VAT if I’m a sole trader?
Self-employed or sole traders might also wonder if they can register for VAT. Being a sole trader actually has no influence on whether you should register it is simply down to your VAT taxable turnover. If you as a sole trader exceed the £85,000 threshold, then you should register for VAT. In fact, 16 per cent of all VAT registered businesses are sole traders. Below this amount, there is no obligation to register.
What documents are needed to register for VAT?
To register for VAT, you need a number of documents and details. Some of these will be simple to find, others you might need to plan ahead:
- You’ll need your National Insurance (NI) number or
- Your Unique Taxpayer Reference (UTR) number
- Details of your business bank account
- Supply records of any sales if you have purchased the business from another owner.
Of course, you’ll also need to provide records of your businesses’s turnover, along with information about the activities and nature of your business. In this way, it should be possible to pick the correct VAT scheme for your businesses.
How to register for VAT
VAT registration can be done via the VAT1 form through the post. Increasingly, though, the vast majority of businesses manage their VAT registration online. You can manage the registration yourself, or through a nominated tax agent.
The move online came among the government’s efforts to reduce paper records and improve accurate records. This is known as Making Tax Digital. Making Tax Digital for VAT means that, eventually, all tax records will be managed online so registering for VAT online from the beginning is a good idea.
To get started, visit the gov.uk HMRC website. The next step will depend on if you already have a government gateway account login. If you don’t already have one, then register for HMRC taxes first. Follow the steps, and keep a record of your new government gateway ID.
Once you have your details, sign into your online account. Then, you need to select the option that allows you to sign up for another tax, duty or scheme one of these will be VAT. Follow the steps to register your businesses to collect VAT.
Through this online service, the registration process is usually relatively straightforward. You should receive a unique reference number that confirms your sign up make sure to keep this safe.
When do I get my VAT number?
Once you’ve registered for VAT, there is typically a bit of a wait until you receive your VAT registration number. You can sign into your VAT account to check progress, although there are normally not too many updates.
HMRC declares that they will send you your VAT registration certificate which includes your VAT number within one month of registration. In many cases, people receive their numbers within a couple of weeks. You might also consider calling the VAT helpline if there are any complications or changes while you wait for your certificate.
Benefits of VAT registration
Once you’ve received your VAT number, you’re free to begin reaping the benefits of VAT registration.
- Keeping VAT records will effectively force you into good record keeping habits
- You can gain credibility or increased trust by displaying your VAT registration number on your businesses’s website, and in official documents
- Some larger businesses might only consider working with you when you can raise VAT invoices
- You can claim backdated VAT refunds any VAT payments you’ve made within a specific time frame can be added to your first claim, potentially providing a cash boost
- You can also claim back VAT you pay on goods and services in the future.
If you are one of the many businesses that register for standard quarterly VAT accounting, you could even see a VAT refund with your first return.
Take the pain out of VAT
VAT has traditionally been seen as an obligation. Once you realise the many benefits it can bring, VAT can actually be helpful to many businesses. The Making Tax Digital online system makes record keeping much easier, while many accounting software platforms integrate with HMRC’s systems, keeping a thorough paper trail.
To begin the VAT registration process, simply collect the necessary documents, find your government gateway ID, and sign in. If you’d like some help with the process, consult a professional VAT services provider for advice.
