VAT is a consumption tax assessed on the value of products and services. Different rates apply for different categories of products and services, and each state sets individual rates. The UK VAT number or VAT identification number is mandatory for members that trade within the state.
Many think UK VAT registration is overwhelming. However, whereas the process has various steps and requirements, you can still navigate through the process with less stress. This article equips you with guidance on how to get a UK VAT number.
You must have at least one VAT number if you are a B2B trader or service provider across borders in Europe. Nonetheless, beyond inter-border traders, various other reasons make registration a necessity.
Whereas some situations necessitate UK VAT registration, not every business has to register for a VAT number. You can also register voluntarily even if the law doesn't require you to do so. If you are in any of the below situations, get a UK VAT number.
The current VAT registration threshold stands at £85,000. So, get a UK VAT number when your business' taxable turnover exceeds the registration threshold. Then, at the end of every month, check whether your returns for the previous twelve months have exceeded the threshold.
Also, get a UK VAT number if you expect your returns to exceed the registration threshold in the next month. For example, if your returns are £ 80 000 and you expect a deal worth £10 000 within 30 days, you'll exceed the threshold. Failure to register for VAT when your turnover grows beyond the threshold attracts hefty fines from HMRC.
When you buy a VAT-registered business, you will have to get a VAT number. Nonetheless, a test is put in place to determine the steps to follow. Get a VAT number if your taxable returns combined with the returns of the business you purchase exceed £ 85 000.
The two main ways to register for a VAT number are online or with a VAT1 paper form. Both approaches are simple if you have all the required information. You'll need:
Suppose you prefer to fill out a form, print and complete VAT1, and other additional forms. Then post the completed form to the HMRC. However, you can't register some businesses online. For example, if you join the agricultural flat rate scheme or use different numbers for different business parts.
If you are a foreign business not established in the UK, submit your VAT registration application to HMRC NEPTU. You could also register at a local VAT registration unit or appoint a tax agent/fiscal representative to handle your taxes.
You need a government gateway ID and a password to access the HMRC portal for online registration. If you have a government gateway ID, proceed as follows.
Nevertheless, if you don't have a government gateway, follow the steps below.
VAT is categorized into three basic rates: standard, reduced, and zero. The standard rate is 20% and applies to most goods and services. On the other hand, the reduced rate is 5% and applies to specific categories, e.g., children's seats, fuel, and sanitary products. Finally, the zero rate is 0% and covers most books, clothes, and food for children. Read more about VAT rates here.
You can request an exemption if you will only exceed the threshold temporarily. You'll need solid evidence to show why you believe you will not exceed the threshold in the next thirty days. The HMRC will confirm whether you qualify for the exemption with a written document. If not, the HMRC registers you for VAT.
Your VAT details should always be up to date, so changes are inevitable. If you want to change your registration details, the UK government website is the platform to do so. Visit the changes to your details page if you wish to edit your name, address, bank details, etc. Also, use the page to take on responsibilities for an ill or dead person.
You can transfer your VAT registration if your business' status changes, e.g., from a sole proprietorship to a partnership. Also, if you want to transfer the registration to a different business, you use the transfer option.
The above guide explores the basics of UK VAT registration to ease your work. Once your business is VAT registered, follow the making tax digital rule to submit your returns. Usually, you get your VAT number 4-6 weeks after submitting your returns. If the process takes longer, maybe the HMRC needs more information, in which case you'll get a notification.