Consider Whether To Register For VAT Voluntarily

23 Sep 2021

A business must register for VAT if the VAT able turnover in the previous 12months is more than the VAT registration threshold (set at £85,000 until 31March 2024)or it is expected that this threshold will be exceeded within the next 30 days.

A business whose turnover is below this level does not have to register for VAT but may choose to register voluntarily. This will allow VAT suffered on purchases and expenses to be reclaimed. This may offset the burden of charging VAT and accounting for it to HMRC.

Where a company is registered for VAT and has turnover in excess of the VAT registration threshold, it must comply with the requirements of Making Tax Digital (MTD) for VAT. If the business has turnover below the VAT registration threshold and has chosen to register for VAT voluntarily, it can choose whether to enter MTD for VAT or not. However, if a business starts to comply with the requirements voluntarily, it can leave the MTD service at a later date, as long as its turnover is still below the VAT registration threshold, and revert to submitting VAT without using MTD-compatible software. However, MTD for VAT will become compulsory for all VAT-registered businesses from their first VAT accounting period to end on or after 1 April 2022.Under MTD for VAT, a business must keep digital records and file VAT returns using MTD-compatible software.

Example:

Simon has turnover of £30,000 a year. He does not need to register for VAT but chooses to do so. As a result, he is able to recover his input VAT. In the first year of VAT registration, he recovers input tax of £3,500, making voluntary registration worthwhile.