In the present time, VAT Registration is the hot topic of discussion in business world. Businesspersons are confused whether they should register for VAT or not? VAT (Value Added Tax) is charged for almost everything we purchase or sell. For 2017-18, the threshold of VAT registration is £85,000. If the turnover (taxable turnovers, means total income made by all sales, not just the profit generated by the sales) of your business is above threshold amount then you have no option than to go with VAT registration.
However, if the turnover of your business is not that much, in this case, you can voluntarily register for VAT. But, is this a good decision for your business? Let’s have a look:
What is voluntarily VAT registration?
As discussed, VAT registration is mandatory for businesses with annual turnover more than the threshold amount. But, being a small business owner, you can voluntarily register your business for VAT.
What are the advantages of Voluntarily VAT Registration?
There are many benefits of voluntarily VAT registration for small businesses. Here are some of them:
- No financial penalties: No one likes penalties. To combat this, you need to be VAT registered. Once you do so, forget about notifying the HMRC about your business income within time or no need to look after your turnover regularly whether it is passing the threshold or not. If your business is not registered and you cross the threshold amount then get ready to receive an angry notice from the taxman. To avoid this, voluntarily register your business for VAT.
- Makes your business deals easier: Most of the suppliers or business owners don’t prefer to deal with entities who are not VAT registered. This can close the doors of a lot of opportunities for your business’s growth. When you register your business, you will get a VAT number and it is quite helpful to make your business deals easy and smooth.
- Great exposure to your business: Nowadays, it is very challenging to boost your business in the market against other big companies already struggling. As now you are aware of the VAT registration threshold, if you register your business for VAT, it helps you make a great impression in the market and make your business look more successful. It makes you sound more credible and trustworthy.
- VAT refunds: If you’re a VAT registered business, then you’re eligible to claim VAT on services and products bought for your company.
- VAT number: After voluntarily VAT registration, you receive a VAT number. Display this VAT number on your business documents, websites, and stationery. It can help your business to earn the trust of people and give your business a professional feel.
- Allow you to reclaim VAT from the past: Once you become VAT registered, you can reclaim VAT from the past four years. And if your business is voluntarily registered for VAT, you can reclaim VAT without even reaching the threshold.
From the above discussion, it is clear that you should voluntarily register your business for VAT. If done carefully, it is a great opportunity to grow your newly started business or earn some extra money!