If you’re not registered for VAT and your taxable supplies have exceeded £73,000 in the last 12 months, you MUST register for VAT.
However, many businesses do not have that level of turnover, or may not have traded a full 12 months, and register VOLUNTARILY for VAT. So should you do it?
There are several factors to consider. Most importantly, are your customers likely to be VAT registered too? If so, it is a fair assumption that they will be able to reclaim the VAT you charge them, so your decision to register or not shouldn’t make any difference to them.
However, if your customers aren’t going to be VAT registered, e.g. private individuals, then by being VAT registered, you are potentially raising your prices by 20%.
There is some compensation: by being VAT registered you will be able to reclaim any input VAT you incur.
Another factor may be image – by being VAT registered, you are potentially giving the allusion that you are perhaps a bigger business than is actually the case. Also, you are more likely to be considered a more reputable/legitimate business.
By being VAT registered, you will have to complete and submit quarterly VAT returns, or employ a bookkeeper to do it for you, but this may be a price worth paying compared with the benefits of registration.
If you need any help considering whether voluntary registration would be worthwhile, please contact us.