As a business owner, it is important to understand when you need to register for VAT and the deadlines for completing VAT returns and payments.
When do I need to register for VAT?
You must register your business for VAT if, over the last twelve months (on a rolling basis, not an accounts year), the taxable supplies exceed the VAT registration threshold. The VAT registration threshold is currently £85,000 a year but usually increases annually.
This applies to all business structures including limited companies, sole traders, and partnerships. Taxable supplies can have a complex definition but for many businesses, this is the sales figure.
You must register within 30 days of the end of the month in which you exceed the registration threshold, so it’s important to keep a close eye on your sales on at least a monthly basis.
You must also register if you expect the value of your sales to exceed the £85,000 in the next 30 days, with the 30 day period again applying for registration. You need to register by the end of the 30 day period, but the registration is effective at the start of it – when you first formed the expectation that your business would exceed the VAT threshold.
If you take over an existing business that is registered for VAT, you may also need to register. If the combined taxable turnover of the two businesses in the last 12 months exceeds the VAT registration threshold, you’ll be required to register.
There are additional VAT requirements if you are involved with distance sales or you are non UK resident with no establishment in the UK,
If your sales are below £85,000 you can register voluntarily.
If you fail to register for VAT
If you fail to register for VAT at the correct time, you will be expected to pay everything you owed from the date the registration should have been effective, together with interest and penalties.
VAT returns and payment
The deadline for submitting a VAT return online and paying HMRC are usually the same – 1 calendar month and 7 days after the end of a VAT accounting period (usually quarterly or monthly). You need to allow time for the payment to reach HMRC’s account. You must pay VAT to HMRC electronically, for example through direct debit or internet banking. Direct Debit means that you will not miss the payment deadline if the return is submitted on time.
There are penalties for late submission and payment together with interest.
If you are part of the VAT Annual Accounting Scheme different deadlines will apply.