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  • Ellie Cooper

Should My Business Be VAT Registered (UK-2019)


I think being an accountant is about the closest you can be to being excited about tax.


Everyone else likes to give the responsibility to someone else, or pretend it doesn't exist. (I don't really blame them).




VAT is inherently confusing, so I have created a simple little guide to help you out as quickly and painlessly as possible.


Disclaimer: please also consult an accountant to look over your businesses specific numbers before making a decision.


The basics:

• You do not have to register for VAT if you are making less than £85,000 in VAT inclusive turnover.

• VAT inclusive turnover is any income that you add VAT to. For example, if you sell jewellery to consumers, you will charge VAT on top of your retail price.

• The amount you owe/are owed to HMRC depends on how much you made in the year, and how much you spent.

• The standard VAT rate is 20%, but you can also be part of a flat-rate scheme which generally runs from 9%-14%, and requires no calculation.

• VAT returns are due every quarter.


A simple example of how VAT returns work:


You sell a necklace for £100 + VAT. Therefore you received £120.

Your costs of goods sold for this necklace came to £50 + VAT. Therefore you spent £60.


Your VAT owed to HMRC would be input VAT (£20) - output VAT (£10) = £10 due to HMRC.



Making the decision:


If you are making over £85,000 in turnover, then you can stop reading with the unanimous answer: yes, you should be VAT registered.


If you are making less, then you have a decision to make. Below are simple advantages to each option.


Becoming VAT Registered

√ You can reclaim any VAT charged on purchases.

√ If you sell to other businesses, they can reclaim the VAT on your prices, which may be an incentive for them to choose you over someone else.

√ When you reach over £85,000, you do not have to file any paperwork, everything is done.

√ You look more official


Not Becoming VAT Registered

√ You do not have to worry about VAT returns

√ What you receive as sales revenue is what you keep

√ Depending on your business, you may end up with more money

√ Reduced accountancy costs


In your first year of trading, if you are making a loss, it may be most beneficial to register. Let's take a look at the example from above, but change a few figures;


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You sell a necklace for £100 + VAT. Therefore you received £120.

Your costs of goods sold for this necklace came to £120 + VAT. Therefore you spent £148.


Your VAT owed to HMRC would be input VAT (£20) - output VAT (£48) = -£28 due to HMRC.


Therefore, you would receive a cheque for £28 that quarter.


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You can always de-register when you want, as long as you are making over the threshold.


Essentially, you want to ask yourself the following three questions;

1. Do I have a choice, or am I already making above the threshold?

2. Provided I have a choice, is it important to my clients that I am VAT registered?

3. Provided I have a choice, is it financially beneficial for me to become VAT registered?


If you have any questions, or want a professional to look over your accounts and give you their recommendation, contact us on: info@cooperfinancials and we will get back to you as soon as possible.






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