This is a potential disaster area for the unwary. At the planning stage you should identify whether the service or supplies you are going to be making are subject to VAT or ‘exempt’ and consideration to registration should be given then.
I don’t know if I need to register for VAT. What is the current registration threshold?
You can register for VAT if you’re in business and you are one of these
An individual, a partnership, a company, a club, an association, a charity, any other organization or group of people acting together under a particular name, such as an educational or health institution, exhibition, conference etc, a trust, a local authority.
From 1st April 2013 you must register if your VATable turnover exceeds £79,000 within (a rolling) 12 month period. There are a number of VAT schemes so it always pays to ask our advice on these before registering.
How does flat rate VAT work?
The flat rate VAT scheme is aimed at simplifying VAT for smaller businesses with an anticipated turnover of up to £150,000 (gross) per annum. You pay VAT to HMRC as a flat rate percentage on your gross sales. The flat rate percentages vary depending on business activity. Under the flat rate scheme you cannot reclaim VAT on your purchases and expenses, but you can on larger capital purchases of equipment over £2,000. Once you enter the flat rate scheme you are free to leave at any time, but then cannot re-enter the scheme for 12 months.
We will be happy to discuss this in more depth should you require further guidance. It can be beneficial but there are potential pitfalls.
To find out more about VAT please click here.
Posted in: FAQ