Are you wondering whether your business is going to benefit from registering for VAT? Are you not sure how the system works? This is something that you might be required to do based on how much money your business makes. It is best to learn all about it so that you can know you are making the right decisions. So, let’s get started and learn about registering for VAT as a business.
What is VAT?
First of all, you need to know exactly what VAT is. This is short for Value Added Tax and this is a sum that is applied to goods and services. Normally, the rate of VAT is 20 percent and it is referred to as a consumption tax. If you are a VAT registered business this means that Vat is going to be charged on any goods or services you sell.
One thing to realise is that there is a lot more administration and bookkeeping involved when you are a VAT registered business. This is why a lot of business owners are choosing to use VAT return services in Northwood. This allows a professional to help you and ensure that you are fulfilling all of your duties as a VAT registered company.
When Do I have to Register for VAT?
Now that you know what VAT is, it is important to understand when it is necessary for your business to register for it. Namely, if your business is in the UK, you are going to have to register for VAT if your annual turnover is over £85,000. It is important to note that VAT is based on taxable turnover, which is the total value of everything you sell.
You can register your business for VAT online. It is also possible to register by post and to use a VAT1 form. When you register for VAT, you are going to receive some important details that you will have to keep safe. This includes your VAT number. In addition, you will have an effective date of registration, as well as information on when you should submit your first VAT return and payment.
Note that if you make a late VAT registration, you will have to pay all of the VAT you owe up to this point. In addition, you will also have to pay a penalty for being late. Thus, it is not worth being late or trying to avoid registering for VAT.
Are There Benefits to being VAT Registered?
A lot of business owners wonder if there are any benefits to being a VAT registered company. The answer is yes. There are a lot of advantages you can look forward to. For instance, you can enhance your professional image when you have a VAT registration number. A lot of customers like to see that a company is VAT registered and this can make you appear like a large and experienced business. In turn, this can bring in more customers and give you credibility.
Then there is the fact that you can claim VAT refunds. Thus, when you purchase goods and services on behalf of your business, you can reclaim all of the VAT you paid on them. This can be a good thing that means better cash flow for your business. When you claim this VAT back, you can use it to your advantage. For example, you can reinvest the money back into the business.
Are there Downsides to Being a VAT Registered Business?
If you are going to be a VAT registered business, there are some things you need to be aware of. Namely, there is going to be a lot more administration involved. For instance, it will be your duty to collect VAT from customers, as well as having to file a VAT return several times a year.
You also have to consider the fact that your prices are going to increase. Namely, it is going to be the customers of your company that will realise that prices will go up by 20 percent. If you do not have a strong customer base, this might not be the best move for your business right now.
The VAT process can also be quite complicated. You will want to learn about everything before you become registered. Again, there are professional services that will help you with VAT. It will be beneficial to seek expert advice before you go ahead with the process. This way, you can ensure it is the right thing to do.