You must register for VAT if your turnover for the last 12 months is greater than £79,000 (2013/14) or you expect it to go over that limit in the next month, however there are situations where it may be worth registering if you are under the limit:
- If all of your customers are VAT registered businesses, they will be able to reclaim the VAT you charge and you can claim back the VAT on any purchases you make
- Some businesses may have zero rated sales (eg food retailers such as butchers). By registering there is no additional cost to the customer but VAT can be claimed back on any purchases
- If you know you will go over the limit and do not want to have to impose a sudden increase in prices
- For credibility of a new business, being VAT registered may give a certain qudos or perception of greater size
However there are also occasions when under the limit you should avoid registering:
- When selling to end consumers (individuals), if you register you will have to add VAT to all of your sales which may make you expensive to buy from
- When you have a mix of business and end users you will need to consider carefully whether registering will drive away those individuals by making you too expensive, despite the fact that you will be able to claim back VAT on purchases.
For many growing businesses these considerations will be short lived as growth will take them over the limit, but it is well worth registering early if there are gains to be made. This only covers some of the considerations to be made so you should seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”