Value Added Tax, or VAT, is imposed on almost everything we buy or sell. Moreover, if you are earning above a certain amount from your business, then you have to register for VAT. And, if you earn below that amount, then you may register if you want. But, the thing to understand here is, is it essential to do so?

When is VAT registration compulsory?

Currently, if the annual turnover of your business is more than £83,000, you must register for VAT.Remember that the amount mentioned here is ‘turnover’ and not profit.So, if you cross this figure, you’re liable to pay the taxes and national insurance. Also, it is essential to consider all the taxable supplies, even if the rate is 0%, except the items that are VAT exempt.

Why do opt for voluntary registration?

The two main reasons that favor voluntary VAT registration are:

  • To reclaim VAT
  • To havea positive impact on clients.

After having registered, if you charge VAT on your products, it is possible to reclaim this VAT that’s charged to you i.e. input tax. And, when your input tax surpasses your output tax for any span, you’ll be able to reclaim the difference amount from HMRC.

When a business is VAT registered, it makes a positive impact on customers. Else, your business may be considered as ‘small.’

Negatives effects of VAT registration

VAT registration has some adverse effects as well.

  • The price of your products or services rises as you have to add this amount to your selling price. This may cause losing of customers due to increase in price. It is common when the customers are not able to claim back the VAT.
  • If your output tax is more than your input tax, then you’ll be in a loss by paying the difference amount to HMRC. This will cause cashflow issues.
  • You’ll have to do a lot of paperwork for filing VAT returns, which should be done quarterly. You’ll be required to have a VAT accounting element to bookkeeping and other reporting processes. Also, you may be charged penalties for late filing.


Is it possible to de-register a business from VAT?

If after voluntary VAT registration, you face the negativeeffects and decide to de-register the business from VAT, then you may do so. You can step back anytime until the turnover amount of your business is less than the threshold value.


Moreover, you’ll also have to de-register from VAT if your business discontinues making taxable supplies or becomes part of a group. Selling a business or having avariation in its legal structure will also require you to de-register.And, if you want to end trading, then you’ll have to notify the HMRC and the Companies House.



VAT is a complex issue. So, you must wisely decide for voluntary registration of VAT. You can earn some extra income from your business if you choose it correctly. Therefore, you should do it carefully after thorough consultation with experts. Otherwise, it may cause loss to your business.

Author : Evan Kenty at ZDK Formations ltd

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