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Some Brief Tips if Considering VAT Registration

Some Brief Tips if Considering VAT Registration

It is currently challenging to secure VAT registration due to a combination of EU businesses needing UK VAT numbers and backlogs within HMRC’s registration unit. To avoid unnecessary delays, it is important to ensure your application meets HMRC’s requirements in full.

We recommend the following:

  • Monitor your VATable turnover on a rolling 12-month basis and apply for VAT registration as soon as you become liable. Waiting until your accountant prepares your annual accounts can lead to late registration and potential penalties from HMRC.
  • Be clear about which income counts towards VATable turnover. Grants, donations and exempt income are excluded from this calculation, and tour operators calculate turnover based on their profit margin.
  • It is possible to register for VAT on a voluntary basis, which allows you to recover VAT on costs incurred to make VATable supplies. However, VAT cannot be reclaimed on costs used for non-business purposes. For example, charities cannot recover VAT on costs relating to their charitable non-business activities. Costs linked to VAT-exempt activities - such as those incurred by landlords providing domestic rental properties - are subject to a de minimis limit. Many organisations assume that VAT registration entitles them to reclaim VAT on all costs. This is not the case and can result in assessments, penalties and interest charges if errors are made.
  • If you are registering your overseas business or a client for UK VAT because they are importing and selling goods in the UK, it is important to respond promptly to any questions raised by HMRC. You should also provide evidence that the business has, or will have, a UK VAT liability, such as contracts or tenders with UK customers. The overseas business must also be clear about how to account for UK VAT. It is common for non-UK businesses to assume that paying import VAT to HMRC on goods they have brought into the country removes the obligation to declare and pay VAT on sales to UK customers. This is not the case.
  • If registering for VAT as a property rental business, the option to tax must be hand-signed by an authorised signatory. HMRC’s VAT registration system does not make this clear, but the option to tax public notice confirms that this is a legal requirement for the option to be valid.
  • Have the UTR number and details of the last company tax return paid or PAYE information ready when applying to register online. HMRC will require this information as part of the registration verification process.
  • Be prepared to wait at least 40 days for your registration application to be processed. VAT numbers are issued by post and can take additional time to reach a non-UK-established business.

If you or your client is struggling to register for VAT or is unsure if VAT applies to your business, please contact The VAT People’s helpline 0161 477 6600 for an initial discussion.