VAT stands for Value Added Tax and limited companies are required to register for VAT. It is the sales tax which is levied against goods and services when businesses taxable turnover which means the overall takings not the profit, for the previous year exceeds or is expected to exceed in the coming 30 days.
If businesses are generating turnover which exceeds the VAT Registration Threshold (a certain specified amount), then they are required by the law to complete the procedure of VAT registration with Customs and HM Revenue.
Once a company becomes a VAT registered company, it can charge VAT on the goods and services which are sold to customers and can also reclaim VAT which is charged on the services and goods bought from other businesses etc. Being a VAT registered is an essential part especially for small businesses.
Listed below are some of the benefits once you become a VAT registered company:
Boosts Business Profile:
Starting out as a new company as it is difficult to compete with the big sharks. People are aware of the VAT registration threshold so making your company a VAT registered company gives the impression that the business is big and thriving.
A number of organizations/suppliers are not really keen on conducting with companies that are not VAT registered. Lacking the quality to produce a proper VAT invoice will result in numerous of these unwilling to deal with you. The advantage of being a VAT registered company is that you will be granted a VAT registration number which would enable you in easy external businesses.
You can reclaim VAT for the last 4 years after becoming VAT registered. If you have not reached at the threshold yet, you could still reclaim your VAT as long as you have saved all the VAT invoices and records.
You cannot be careless with taxes. If you are not careful about your turnover exceeding over the VAT registration threshold, you could be fined massively for your business if you fail to register. Getting yourself VAT registered will allow you to stay safe form financial penalties without having to worry about notifying the HMRC or passing the threshold.
When you are VAT registered, you get a VAT registration number for your business which you should display on your website, stationery as well as correspondence. It will not only give your business a professional touch but also embed faith in your company.
You can claim VAT on services and goods that are purchased for your business. If you are buying a standard rate product and selling a VAT rated product i.e. zero rated, you could receive money from HRMC via VAT refunds.
You could easily become a VAT registered by registering yourself with the HRMC. In case of any issues or problems that may arise during the process, it is wise that you opt for a skilled agent to make your company a VAT registered company.