How to register for VAT
A step-by-step guide to the VAT registration process, from creating an account with HMRC online to reclaiming VAT on historic goods and services
As discussed in part one of this guide, when do you need to register for VAT, all businesses with VAT taxable turnover (so everything you sell that isn't exempt from VAT) of £85,000 or more need to register for VAT.
Cost of VAT registration
There is no VAT registration cost: you can use an accountant to complete your return, or file it yourself.
Before you begin, you will need the following information to hand in order to register for VAT:
- National Insurance (NI) number or ‘tax identifier' – a unique taxpayer's reference
- Certificate of incorporation/incorporation details
- Details of all associated businesses within the last two years
- Business bank account details
- Details of the business that has been transferred (acquired), if appropriate
There are currently two ways to register for VAT: online or via a paper form.
Registering for VAT online
Unless you have unusual circumstances, for example if you trade internationally or are part of a group, you may register for VAT online at HMRC's website, www.hmrc.gov.uk.
In order to gain access to the VAT online services, you must first have registered for HMRC Online Services or the Government Gateway.
Please note, the nominated partner of a self-employed partnership can now use HMRC's online system and a business group who are using one VAT number (previously this wasn't possible).
Sending a paper form
There are several instances where you may register using form VAT1 which is available for download from HMRC's website. These include:
- If you need to apply for a ‘registration exception'
- You're registering several divisions or business units under different VAT numbers
- You're joining the Agricultural Flat Rate Scheme
HMRC is paperless
Whichever route you choose, all newly VAT-registered businesses are required to submit their VAT returns and any VAT payments electronically.
This has been the case since April 1 2012, when it was extended to virtually all VAT-registered businesses, not just newly registered ones.
So once your VAT4 (certificate of registration) has come through, register for VAT Online Services with HMRC online. To do this, you'll need the following five pieces of information about your business:
- Your VAT registration number
- The postcode of your principal place of business (if you're an overseas business, please use postcode AB10 1ZP)
- Your effective date of registration for VAT
- The final month of the last VAT return you submitted
- The ‘Box 5' figure from the last VAT return you submitted
You will be able to find the first three pieces of information on your VAT4 (see above).
Because the business is newly VAT-registered, you will need to select N/A for the ‘final month of last VAT return submitted' and enter 0.00 (zero) for the ‘Box 5' figure on last VAT Return submitted.
Purchases made prior to VAT registration – reclaiming the VAT
Once the business is VAT-registered, you may be able to recover some historic VAT you've incurred. But the time limits and conditions differ depending on whether you're dealing with goods or services:
You can reclaim VAT on goods you bought or imported up to four years before you were registered for VAT if all of the following apply to the goods:
- They were bought by you as the entity that is now registered for VAT
- They are for your VAT taxable business purposes
- They are still held by you or they have been used to make other goods you still hold
The last rule is usually quite hard to achieve, because the goods have already been sold or perished. Also, notice that it states that the goods must be for ‘VAT taxable business purposes', so if the goods are used in a part of the business that is exempt for VAT purposes, the VAT cannot be reclaimed.
HMRC recommends that a stock-take is undertaken is order to establish the level of stock at the point of VAT registration.
You can reclaim VAT on services you bought during the six months before you registered for VAT if both of the following are true:
- The services were bought by you as the entity that is now registered for VAT
- The services were for your VAT taxable business purposes
New businesses will often have incurred professional fees for accountancy, tax and/or legal advice. Provided the above conditions are met, the business should be able to recover the VAT on these fees.
Whether goods or services, you are expected to have VAT invoices, and the VAT element recovered should be based on the amount shown on the invoices – not on the current rates of VAT.
Furthermore, HMRC recommends that you record the transactions – like any other present-day transaction. And if they are goods, the department also suggests that you keep details of their usage/expiration etc – in addition to the stock-take mentioned above.
Not sure if you need to register for VAT? Check out part one of this guide: When do you need to register for VAT?
Jo Nockels is training and communications manager at TaxAssist Accountants.
TaxAssist Accountants: This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayers' circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.