Last updated Oct 18, 2024 and written by Aditi Mohan

What Are the Pros and Cons of Registering for VAT?

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You must register for VAT when your company has a taxable turnover of £90,000. However, you can opt to register for VAT before your company makes that revenue. There are a few reasons why registering before the threshold could be beneficial for your business. 

Our blog runs through the benefits and drawbacks of registering for VAT early.

What is VAT?
 

VAT or Value Added Tax is a tax placed on goods and services, it is levied on each stage of the supply chain from where value is placed. In the UK, this is a 20% tax on anything sold  by a VAT-registered company. 

Pros for Registering for VAT 

  • You will be able to recover VAT on your purchases. 
  • The VAT you can recover will not just be from the date you register for VAT but will include any VAT you have suffered on goods or assets purchased 3 years before registering for VAT, providing they are still on hand at the time of registration and that you have the evidence of this such as an invoice. 
  • VAT on services incurred before starting a limited company can be recovered up to 6 months before the VAT registration. The services have to be for business purposes and you must keep an invoice. 
  • There is generally a considered view that there is an element of credibility in being registered for VAT. If your customers see you as a limited company, not VAT registered, they may well think the business is not large enough to service them properly.

Cons for Registering for VAT

  • VAT is extremely complicated. 
  • You will have to keep careful VAT records and accounts. 
  • You will have to send in regular VAT Returns. 
  • You may well be subject to a higher level of scrutiny by HM Revenue & Customs. 
  • You may well need additional accounting assistance on VAT issues. 
  • VAT on petrol is an added complication. 

How to register for VAT
 

To register for VAT you have to apply directly with HMRC via gov.uk. Registering for VAT can be extremely tricky, up to 50% of applications get rejected due to errors. Save yourself the hassle and time by opting for VAT Registration Assistance. Our expert team can make sure your application is complete and correct.

NB: VAT Registration Service is for Companies Limited by Shares only.