Jul 102007
- If your turnover is above the VAT threshold, you must register.
- If all of your customers are VAT registered, you may wish to consider registering, even if you are below the threshold, so that you can reclaim your input VAT (the VAT on your purchases). Registering for VAT will have no effect on your customers, as they will be able to reclaim the VAT
- Some businesses benefit from being on the Flat Rate Scheme. This scheme was intended to simplify VAT returns for small businesses (there are limits to who can join this scheme) but the inadvertent profit arises from HMRC applying an “average” percentage to turnover. So some businesses “profit” from using the Flat Rate Scheme, while others don’t – it’s worth doing some calculations first!
- It can give the impression of a bigger or more established business.
However, beware, that if your customers are not VAT registered, then by registering for VAT you will effectively be raising your prices by the VAT amount, which will make you more expensive.
Unless you choose to absorb the VAT into your prices, which will have profit implications for you.
(Obviously, if you breach the VAT threshold, you will have register for VAT regardless of the VAT status of your customers.)
