VAT registration

You must register for VAT when your taxable turnover exceeds £90,000 in any rolling 12-month period (threshold from 1 April 2024). There is also an immediate registration requirement if you expect your taxable turnover to exceed £90,000 in the next 30 days alone. You can choose to register voluntarily at any turnover level if you make (or intend to make) taxable supplies.

What counts as taxable turnover

Taxable turnover includes the total value of everything you sell that is not VAT-exempt. Specifically, it covers:

• Standard-rated supplies (20%) -- most goods and services
• Reduced-rate supplies (5%) -- domestic fuel, children's car seats
• Zero-rated supplies (0%) -- most food, books, children's clothing, exports

Taxable turnover does not include:

• VAT-exempt sales (insurance, education, certain health services, finance)
• Sales of capital assets (equipment you are selling off)
• Non-business income (dividends, interest, donations)

Use a rolling 12-month calculation: at the end of each month, add up your taxable turnover for the previous 12 months. If it exceeds £90,000, you must register.

Registration timing and deadlines

You must notify HMRC within 30 days of the end of the month in which you exceeded the threshold. Your effective registration date is the first day of the second month after you went over (the "historic test"). For example, if your rolling 12-month turnover exceeded £90,000 at the end of June, you must notify HMRC by 30 July and your registration takes effect from 1 August.

If you expect to exceed £90,000 in the next 30 days alone (the "future test"), you must register immediately and the effective date is the beginning of that 30-day period.

HMRC typically processes registrations within 30 working days, though it can be faster. You should start charging VAT from your effective registration date even if you have not yet received your VAT number -- issue invoices showing "VAT registration applied for" and adjust once you receive your number.

Voluntary registration

You can register for VAT voluntarily at any turnover level if you make (or intend to make) taxable supplies. This includes intending trader registration -- you can register before you start making taxable supplies if you can demonstrate a genuine intention to trade.

Benefits of voluntary registration

• Reclaim input VAT on business purchases, including pre-registration claims (goods still held at registration up to 4 years back; services received within 6 months before registration)
• Business credibility -- VAT registration signals an established, professional business, and some larger clients require VAT-registered suppliers
• B2B advantage -- VAT-registered customers can reclaim the VAT you charge, so your prices are effectively the same to them
• Prepare for growth -- get VAT processes in place before mandatory registration

Drawbacks of voluntary registration

• Price impact for B2C -- consumers cannot reclaim VAT, so you must either charge 20% more or absorb VAT and reduce your margin by one-sixth
• Administrative burden -- quarterly VAT returns, MTD-compatible software, VAT invoicing, and 6 years of record-keeping
• Cash flow -- you must pay collected VAT to HMRC, even if your customer has not yet paid you (unless you use the Cash Accounting Scheme)

Special registration types

Group registration

Connected bodies corporate (companies under common control) can apply to register as a VAT group. The group is treated as a single taxable person, with one representative member submitting returns. The key advantage is that supplies between group members are disregarded for VAT -- no VAT is charged on intra-group transactions. However, all members are jointly and severally liable for the group's VAT debts.

Transfer of a going concern (TOGC)

If you are buying or selling a business (or part of one) as a going concern, the transfer can be VAT-free provided certain conditions are met: the assets are sold as part of a business, the buyer intends to carry on the same kind of business, and the buyer is (or becomes) VAT-registered. The buyer can apply to take over the seller's VAT registration number using form VAT68.

Deregistration

You can apply to voluntarily deregister if your taxable turnover has fallen below £88,000 (the deregistration threshold from April 2024) and you do not expect it to exceed £88,000 in the next 12 months. You must deregister if you stop making taxable supplies altogether. On deregistration, you may owe VAT on stock and assets still held if the total VAT would exceed £1,000.

Late registration penalties

If you fail to register on time, HMRC will assess you for the VAT you should have charged from the date you were required to register. You will owe this VAT even if you did not charge it to your customers. Additional penalties are calculated as a percentage of the VAT due during the period of non-registration:

• Non-deliberate failure: 0% to 30% (depending on disclosure and cooperation)
• Deliberate failure: 20% to 70%
• Deliberate and concealed: 30% to 100%
• Minimum penalty: £50

In serious cases, deliberate failure to register can lead to criminal prosecution.