Mandatory VAT Registration
Mandatory registration for VAT is required if a business’ turnover on which the tax could be applied exceeds the stated limit.
The current threshold applicable in 2018/19 is £85,000 (2017/18 - £85,000, 2016/17 - £83,000, 2015/16 - £82,000, 2014/15 - £81,000, 2013/14 - £79,000, 2012/2013 - £77,000, 2011/2012 - £68,000, 2008-2010 - £67,000, 2007/2008 - £64,000) and in situations where this amount has been exceeded in the prior twelve month period, registering for VAT becomes a legal obligation.
In addition, where a business anticipates that its taxable sales will breach the £85,000 limit in any thirty day period, it must also then apply for registration.
Taxable sales are any supplies which are made by a business which would fall in to the category of any of the three
Voluntary VAT Registration
Registering for VAT voluntarily is the process of applying for the tax even though the business’ taxable turnover has not yet breached the mandatory limits.
The reasons why a business might choose this option might be to portray that it has sales in excess of £85,000. This might make it easier for it to gain business as potential customers surmise that it already has a customer base with sales in excess of the threshold.
Another reason why an enterprise might opt for voluntary VAT registration is so that it is able to reclaim the tax it suffers on its purchasers.
Whether voluntary or mandatory, registering for VAT often results in an increased administrative burden for the business and exposes it to fines and penalties.
Before concluding that voluntary registration is the best option, the facilities and resources required to efficiently administer the scheme and avoid the adverse consequences of incorrect or late returns.