Reading Time: 2 minutes, 2 secs

When you should register for VAT

Short Answer

You must register for VAT if you make sales of more than £83,000 per year (2016/17). You would likely benefit from registering early if you sell to businesses but if you sell to consumers only you shouldn’t register unless you have to.

Do you have to register for VAT?

The 2016/17 VAT registration threshold is £83,000. That means that if your sales exceed that number for the last 12 months you must register. That is unless one of these exceptions apply:

  1. You sell VAT exempt goods & services – This is rare and generally only applies to businesses selling healthcare, teaching or financial products.
  2. You had significant ‘one-off’ sales – If you were fortunate enough to win an exceptional sale that just pushed you over the registration threshold you can apply to waive the VAT registration on the basis that next year you will be below the registration threshold.

So that explains if you are required to register for VAT. Even if you don’t have to though it’s definitely worth considering if you would be better off by doing so.

Do you sell to VAT registered businesses?

If you sell to VAT registered businesses they won’t mind if you have to increase your prices by 20% to include VAT. That is because they will just be able to claim the VAT back off HMRC and they are left no worse or better off.

If, alternatively, you mostly sell to individuals (ie. normal people) who are not VAT registered then they will not be able to claim back the VAT on your product or service so will be made worse off by you charging them VAT. If that is the case you will become less competitive by being VAT registered. It’s notable that many such businesses actually stop trading when they approach the VAT registration threshold because if this is exceeded they will have to pass on a 20% price rise to customers.

The advantage of being VAT registered is that you will be able to claim back the VAT on your own expenses. So if your customers aren’t going to mind you adding VAT to your invoices and you can claim cash back from the government you should go ahead and register.

How to register for VAT

If you are a Caprica Online client just ask your Caprica accountant and they will be happy to check whether you would save money by registering and if so will complete the VAT registration paperwork for you.