The Benefits A Business Will Receive Through VAT Registration UK

As a business or an individual looking to make plenty of money, you will have a lot of formalities and responsibilities to take care of. It would be a lot easier if it was just a case of making money and paying a few taxes along the way, but owning a business and starting a huge venture Means you have to undergo a few more tasks. Some of them seem daunting on the surface because one may not have even heard of certain responsibilities before, but they are all necessary and all pretty straightforward once you get used to them all.

An important topic that should be addressed in business is that of VAT and UK VAT registration. When a business hits a certain point of status, it has to ensure that it registers for VAT. It is obligatory and not something that should be avoided as there could be penalties if so. As somebody just starting out in business, you may not have heard about this kind of thing before because it doesn’t often get discussed until you’re actually underway. Many people have heard of VAT when buying goods, but they never really take it into account when it comes to their own business ventures.

Here, we are going to quickly run through a few important points regarding UK VAT registration before giving the lowdown on the benefits. Will quickly touch on a few drawbacks along the way because it would be disingenuous to avoid them. So, without further ado, let’s get started:

What Is VAT And Why Must A Business Be Registered?

VAT stands for value-added tax. It is a sales tax that is charged by VAT registered. Whether they are selling goods or services, they will add VAT to whatever they are offering. Once the business reaches a sales threshold of £85,000, they will, by law, be required to enact this element of their transactions. The trader will charge the VAT and add it to the original price. They will then pay over to HM revenue and customs as part of the rule. HMRC is the government’s tax-collecting authority, so it’s not something that can be avoided or worked around.

To reiterate, this is not something that all traders must abide by. They are all not obliged to take part in this until they reach the allotted threshold. However, some businesses or individuals may choose to voluntarily pay VAT for a number of significant reasons.

What Is The Rate?

The standard rate of VAT is 20% but it’s not entirely fixed in that regard. The percentage will depend on the kind of good or service that is being sold. There are, of course, millions of different items and services that are sold around the country and the world, so it’s a case of knowing how much VAT to apply to each. For instance, children’s clothing is charged at the rate of 0%. The likes of household fuel is charged at 5%. 

The rate of VAT will likely rise or be lowered based on the circumstances surrounding everyday life, too. For instance, sectors such as hospitality and tourism had lower rates of VAT due to being severely struck by the coronavirus pandemic. This later ceased in March 2022, but it’s just an example of how it can be manipulated based on the surroundings.

What Are The Requirements 

As touched on previously, a business will have to earn over £85,000 in sales for the year. Reaching this level and refusing to register for VAT will result in significant punishments. There are no other requirements other than this as there is nothing to focus on besides the income aspect.

How Does One Register Properly?

If you are busy or you aren’t aware of the steps that are necessary, you can use a service to help you register for VAT at a reasonable price. With this kind of service, you will have a lot of the burden taken away from you.

You will be able to speak to professionals who can give you simple and to-the-point answers. they will also prepare and submit your registration application to HMRC professionally. Every question you have and everything you need will be handled by this group. It can take up to a month to register for VAT online so it’s a good idea to keep records and invoices during this time. You may need to refer back to certain events and instances.

What Happens If A Business Does Not Register – Or Register In Time 

You are given a month and seven days to file your VAT by HMRC. There are no exceptions in getting this filed and paid. There is a significant penalty regime and it’s something that can really spiral out of control if you do not have things sorted out. If you are late with your payment or simply cannot pay, you will be dealt a large penalty. The more often you do this kind of thing, the bigger the charges become. Things can become very expensive if you do not get things under control.

The Benefits Of VAT Registration 

Now, we are going to talk about the main point of the article: the benefits. While this is all a mandatory procedure, it does not mean that you have to suffer through it all.

Businesses that pay VAT will have the perception of being larger. While VAT can be somewhat of a negative, it gives off the illusion of being a large and professional business.

You will have a better insight into the information surrounding your business if you have up-to-date records due to the UK VAT registration number.

Registering for VAT and subsequently paying the fees necessary would likely result in you reclaiming money and being better off in the long run. 

You are able to claim VAT on items that have been purchased prior to the date of UK VAT registration. Your accountant will be able to sort things out for you regarding this matter.

Are There Any Disadvantages Of VAT Registration? 

In the grand scheme, registering for VAT is more of positive than negative. It is an obligatory thing to do but it’s also something that will enhance your business. It would be wrong to ignore a few slight cons, however.

For instance, the VAT process can become quite convoluted over time. If you’re a new start-up and are looking to grow, the complexity of the system can be a pain. While it’s quite a simple idea, there are certain sectors that can really confuse most.

Due to the complexity of the process, you may miss out on the VAT or due. This is down to not claiming the VAT that you are due at the time. Certain VAT claims come forth through the cracks as it is not a 100% flawless system. 

We’ll also mention the obvious point in that your prices will increase. When you are VAT registered, your prices will likely go up by around 20%. This will obviously not sit well with a lot of companies and customers you are dealing with. If you have been an exclusive and fixed price for a while, your stakeholders might be comfortable with how things are running. A new and increased price can put the cat among the pigeons.

Can A Business Register Voluntarily? 

If you are earning under the threshold of £85,000, you can still volunteer to pay VAT. This decision will provide plenty of benefits during your business’s growth.

Benefits

As a small business looking to grow, adding VAT to your prices can again give the illusion of being a much larger and more mature business. This is an important part of trying to build relationships and maintain stakeholders.

VAT can be claimed on most goods or services purchased from other businesses. This allows a positive relationship for all.

As mentioned before, the UK VAT registration number will mean you’ll have to keep more accurate records. This will mean the way your business is running will be a lot more efficient.

Cons

If you aren’t used to the extra administration and paperwork, this kind of thing may hamper you some water.

As a business that does not even need to pay VAT, you may be alienating a certain base by putting prices up significantly.

Conclusion

Overall, while it is a necessary procedure, registering for VAT is an extremely positive thing with many benefits. As soon as you get over the line and beat the convoluted process, you are ready to shine as a professional and long-term business.