When you can register for VAT
You can generally register for VAT if you are in business. HM Revenue & Customs (HMRC) generally defines a \'business\' as a continuing activity involving getting paid for providing goods or services - in money or another form of payment such as in-kind or barter.
When you are in business
You are in business when, for example:
• you earn an income by carrying on a trade, vocation or profession; whether by being self-employed or through another entity such as a limited company
• you provide membership benefits as a club, association or similar body in return for a subscription or other form of payment
• you provide certain other activities as a club or other recreational body, charity or other non-profit making body
• when you charge admission to a premises
To be in business, these activities must have a degree of frequency and scale and be continued over a period of time.
When you are not in business
Even if your activities have some or all the characteristics of a business, they may not be considered a business for VAT purposes if they are essentially a recreation or hobby, or an isolated transaction. The one off or infrequent sale of your personal belongings, for example, would fall into this category.
When you must register for VAT
If you are in business, you must register for VAT if your turnover for the previous 12 months is above £67,000. This is known as the VAT registration threshold. It changes regularly, so you should regularly check your turnover against the current threshold.
You must also register for VAT if:
• you think your turnover may go over the threshold in the next 30 days
• you take over a VAT registered business as a going concern
• you are selling goods into the UK from another country in the EU and exceed the \'distance selling threshold\' - see the section below on registration and international trading
• you acquire goods from other countries in the EU totalling more than £67,000 in a year - see the section below on registration and international trading
Do not avoid registering for VAT by artificially separating business activities
If you run more than one business the sales in all those businesses must normally be added together to determine whether or not you must register for VAT. However, if you are involved in the running of several separate legal entities, you may not need to combine the sales of those businesses to find whether you need to be VAT registered.
If HMRC decides that you artificially separate one business into smaller parts to avoid registering for VAT, it can decide that the entire business is a single taxable person and therefore must be registered for VAT.
Situations that HMRC may consider a single taxable person for VAT purposes include:
• Separate entities selling to registered and unregistered customers. The VAT registered business sells only to VAT registered customers and the business not registered for VAT sells to customers who are not registered for VAT.
• The same equipment or premises being used by different entities on a regular basis. The premises and/or equipment are owned by one of the parties, who charges rent to the others. This situation may occur in businesses such as launderettes and takeaway food operations.
• Splitting up what is usually a single sale. This is common in industries such the bed and breakfast trade, where one business supplies the bed and another the breakfast.
If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, the matter will be investigated and you may be prosecuted.
When you may register for VAT voluntarily
You may register for VAT voluntarily if:
• your turnover is below the £67,000 threshold required to register
• you are starting a new business that has not yet started to trade
• you are an overseas trader selling goods to UK customers - distance selling - where your sales value is under the relevant threshold
• your business is in the UK and you supply goods or services only to customers outside the European Union (EU) - but only if you purchase goods or services from UK VAT registered businesses and/or you import goods into the UK on which you could reclaim VAT
Benefits of voluntary registration
There are a number of cashflow advantages of being able to charge VAT on your sales and claim back VAT on your purchases. For example:
• if you sell zero-rated items and buy standard-rated items you would receive a VAT refund from HMRC
• if you have not yet sold anything or don\'t sell anything during a VAT accounting period, you can still claim VAT back on your purchases
• you have the use of the VAT your customers pay you before you have to pay it to HMRC
Responsibilities of voluntary registration
If you opt for voluntary VAT registration, you must keep all required VAT records and issue VAT invoices. You also have to complete and submit a VAT return at regular intervals, along with your payment or your request for a refund.
When you do not need to register for VAT
There are particular instances where HMRC may excuse you from VAT registration even though you otherwise would need to register.
Your products are primarily zero-rated
If you buy and sell all or mainly zero-rated goods or services, you may apply for an \'exemption from registration\'. This may make sense if you pay little or no VAT on your purchases.
You apply for an exemption from VAT registration by filling in a VAT registration form, stating why you are applying for an exemption from VAT registration. If you charge VAT on some of your sales you must also show that the VAT you would reclaim on your sales would normally be more than the VAT you would pay on your sales.
If you are granted exemption, you must inform HMRC of any relevant change in circumstances for instance if you no longer sell mainly zero-rated items.
If you are not granted an exemption, you will become registered for VAT from the day you were otherwise liable to be registered. You will need to account for VAT from that date.
Your turnover has only gone over the registration limit temporarily
Even if your turnover has gone over the registration threshold, currently £67,000, HMRC may excuse you from registering for VAT if you can show that your future turnover will be below the deregistration limit, currently £65,000.
Registering for VAT if you do business internationally
Acquisitions of goods from other EU countries
If you acquire goods in the UK from other EU countries worth £67,000 or more and do not intend to use those goods to make taxable supplies, you may have to register for VAT in the UK.
Businesses with no UK place of business selling to UK customers
If you would normally need to register for VAT under UK VAT rules, but you do not have a permanent place of business in the UK, you must still register for VAT in the UK. You will be treated as a \'Non-established Taxable Person\' (NETP).
Distance selling from other EU countries to UK customers
If the value of goods that you sell from another EU country to UK customers - distance selling - is £70,000 or more, then you must register for VAT in the UK.
You can download the application form to register for VAT as non-UK business distance selling to UK customers, but the registration cannot currently be completed online.
International trade and goods subject to UK excise duty
If you sell goods from another country in the UK which are liable to UK excise duty, such as tobacco or alcohol, then you must register for VAT in the UK regardless of the value of your sales.
When you will not be able to register for VAT
You cannot register for VAT if you are not in business or if you sell only goods or services that are exempt from VAT.
Details Required For VAT Registration Form
1) Name of the company (or partnership name) and country of incorporation.
2) A detailed description of the nature of the business (i.e. goods dealt in or services supplied).
3) Whether the business has commenced and when, and if not, evidence of intention to trade (e.g. contracts and sales or purchases invoices, whether draft or final).
4) Date from which VAT registration is required (if different from 3) above) and which should not be prior to the last 2.5 months.
5) Letter on headed notepaper of the business, per the draft attached, authorising Appleton Secretaries Limited to act in signing VAT forms as principal, plus, once signed at Box 19 by one of the directors or its company secretary, return to us of the UK VAT registration application form which we will post to you.
6) The registered office and incorporation number of the entity if a company (both usually shown on 5) above), date of incorporation and main overseas Head Office address (presumably at your office).
7) The name and address of the Company Secretary.
8) Who the directors of the company are (normally this and their nationality would be indicated on the authority letter) and where they are resident.
9) Expected level of total sales forecast for the next 12 months. A niinimum of £50,000 is preferred.
10) Whether the business will have any UK VAT registered or UK resident customers, and if so, the expected level of UK sales. If not known, the level of sales made to them in the preceding 12 months.
11) Whether the business will buy goods or services from UK VAT registered parties and, if so, the expected level of UK purchase in the next 12 months. If not known, the level of UK purchases in the preceding 12 months.
12) Estimated intra EC sales of goods in the next 12 months (i.e. where both the suppliers and the customers are within the EC), separately indicating sales to the UK if these can be separately estimated (probably the same as in 10) above).
13) Expected EC purchases of goods in the next 12 months, separately indicating the UK purchases if these can be estimated (probably the same as in 11) above).
14) Any plans to buy from, or sell into the UK if this is not currently happening, together with a note of expected level of activity.
15) The place of manufacture of any goods mentioned in 2) above.
16) (a) The countries from which any such goods are shipped.
(b) The countries to which any such goods are shipped (i.e. the countries in which the end purchasers are located).
(c) The place of performance of services and, if different, the location of the customers also.
17) The type of customers who purchase the particular products or services.
18) An estimate of likely UK VAT recovery if UK costs carrying VAT are expected to be incurred other than through this location as the representative office.
19) Copies of the brochures from the manufacturer, vendors and customers so far as available, even if not in English.
20) The bank sort code, bank account number and currency of the account, as well as the address and phone number of the UK bank if applicable.