If you operate a small or medium-sized enterprise in the UK, you may need to pay attention to Value Added Tax (VAT) issues.

Most of our clients are concerned about whether VAT registration will cause more trouble for their businesses.

Our accounting team provides detailed answers that may help alleviate your concerns.

VAT Registration

VAT registration depends on whether your revenue has exceeded £85,000 in the past 12 months.

The VAT registration threshold will remain the same until March 31, 2024.

If your business has had revenue of less than £85,000 in the past 12 months, you can voluntarily register for VAT.

Once your business exceeds £85,000, you will need to register for VAT with HMRC within 30 days.

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What is the VAT registration threshold?

The VAT registration threshold is determined by your turnover, not the profit you make from transactions.

If your turnover is about to exceed £85,000, we strongly recommend that you register for VAT in advance.

Alternatively, you should closely monitor your recent turnover to prevent further trouble.

How is the VAT registration threshold calculated?

If you have detailed income and expenditure records or financial statements, you can calculate your turnover by adding up your total sales from the previous fiscal year (e.g., from April 2022 to March 2023).

For example, if you sold goods worth £7,000 and provided services worth £2,000 in the past 12 months, your total turnover would be £9,000. At this point, you must register for VAT and charge VAT on the goods and services you sell.

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What if you only temporarily exceed the threshold?

We understand the concerns of small business owners, as it is sometimes impossible to predict future sales. If your business temporarily exceeds the VAT registration threshold, you can apply for an “exception.”

Applying for an “exception” requires you to write to HMRC explaining why you are applying not to register for VAT.

This includes explaining that exceeding the VAT threshold is a one-time event and ensuring that you will not exceed the threshold in the short term.

In addition, you will need to provide supporting documents as evidence, and you may need professional help from a team to complete the application.

We are also an Amazon VAT partner, so if you want to transfer some of your business to online operations, you can still use our services.

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