A UK VAT registration guide for UK businesses
Who can register for VAT?
A business may be registered for VAT if it is classed as ‘in business’ and is any one of these entities:
- An individual
- A partnership
- A company
- A club
- An association
- A charity
- Any other organisation or group of people acting together under a particular name, such as an educational or health institution, exhibition, conference, etc.
- A trust
- A Local Authority
For VAT purposes, the individual or organisation that is in business is known as a ‘taxable person’.
Who cannot register for VAT?
You cannot register for VAT if either of these is true:
- you sell only goods or services that are exempt from VAT, or
- you aren’t in business according to the definition that HM Revenue & Customs (HMRC) uses for VAT purposes.
‘In business’ for VAT purposes is defined by HMRC as “a continuing activity involving getting paid for providing goods or services – in money or another form of payment such as in-kind or barter.”
Additionally these activities must have some degree of frequency and scale, continued over a period of time.
VAT registration may be either optional or mandatory depending on what criteria are met, such as business that exclusively provides exempt goods/services. Mandatory registration occurs due to a turnover threshold, of £82,000. Once over this threshold, VAT registration is compulsory, measured by either the ‘past’ test or the ‘future’ test.
The ‘past’ test is that you must register if your turnover in the prior 12 months exceeds £82,000. It is important to note that when turnover goes over the threshold in this situation the business has until the 1st day of the month following the period to register.
The ‘future’ test is whether the business predicts to be over the £82,000 threshold entirely within the next 30 days, in which case it must register immediately (however if turnover is deemed to have gone over the threshold temporarily then it may be possible to apply for exception from registration – more later). Similarly if you receive goods/services from other EU countries amounting to the same threshold criteria then VAT registration is compulsory and acquisition VAT/reverse charge must be accounted for on the intra-EU supply.
If a business is operating under the £82,000 limit then it can still register for VAT voluntarily – there is no legal requirement to register if under the registration threshold.
Businesses that ‘temporarily’ go over the VAT registration threshold can apply for exception from registration should they be able to prove that in the longer term the business will only be trading below the de-registration threshold of £80,000.
The de-registration threshold is an amount that should a VAT registered business fall below with regards to turnover, then it may de-register from VAT and therefore no longer be able to reclaim VAT on costs or charge VAT to its customers.
More information on VAT registration can be found from HMRC:
If you would like to talk to us about your VAT registration requirements, or you would like us to register you for VAT, please do get in touch – we’ll be happy to help.