Do I need to register my limited company for VAT?

20th November 2024

One of the most frequently asked question we receive is, can you register my company for VAT? But really a better question would be, should I register my company for VAT?

So, what is VAT?

VAT or Value Added Tax is a tax on consumers which is added to most goods and services provided by VAT registered businesses.   When do I have to register for VAT? Here in the UK the compulsory VAT threshold is £85,000 for 23/24. When your turnover reaches this figure, you are required to register for VAT unless you work in a VAT exempt industry.  

What is the difference between zero rated and VAT exempt?

Although zero rated and VAT exempt may seem like the same thing, how they are treated and the effect it has on your VAT return are very different. Zero rated goods and services are those that have a VAT rate of 0% meaning no VAT would be charged but the supplier is able to reclaim VAT back on the VAT spent. VAT exempt means that the good and services are not subject to VAT and any VAT charged to the suppler cannot be reclaimed. If your business is in a VAT exempt field this means your business cannot register for VAT.  

Who should register for VAT

For many businesses there is little advantage in voluntary registering for VAT. By doing so you will need to charge an extra 20% on your product or services or deduct this from your profits, making you and your business less competitive. If, however you provide zero rated products or services by registering for VAT you would be able to reclaim the VAT on your expenses making a VAT registration beneficial. You may also find that if you are providing services or products to larger well-established companies a VAT registration will make you look more reputable and as they will also be VAT registered, they will just reclaim the VAT charged.  

Other considerations

Lastly you will also need to consider the ongoing VAT management. Becoming VAT registered will require you to make monthly or quarterly VAT returns. You can either chose to manage this in-house or to outsource the work to an accountant who will charge for the service. On top of this, with the new Making Tax Digital (MTD) system with HMRC you are required to submit VAT through an online accounting software. These software’s usually come with a monthly charge which can add to your expenses when getting set up.  

Hopefully this post has given you a few things to consider before becoming VAT registered.

If you would like to discuss this further our sister company Walton Accountancy would be happy to go into more detail. You can call them on 02392 593917.