Value Added Tax (VAT) is the sales tax levied against goods and services within the UK. Businesses with a turnover in excess of the VAT Registration Threshold (currently £77,000 P.A. 2011-2012) are required by law to complete a VAT Registration with HM Revenue & Customs. Businesses that fail to do so within 30 days of reaching this threshold are liable for a penalty for failure to notify.
Once a business is VAT registered it can charge VAT on goods and services sold to customers and also reclaim VAT charged on goods and services purchased for the business from other businesses, suppliers etc. VAT registration is therefore an important part of small business.
What is Voluntary VAT Registration?
Although VAT registration is required by businesses with a taxable turnover above the threshold it is still possible to voluntarily register your business for VAT. And there are several business benefits to doing so.
What are The Benefits Of Voluntary VAT Registration?
There are a few benefits of voluntary VAT registration which make it quite appealing for small businesses.
Avoiding Financial Penalties
No one likes to get an angry letter from the taxman. If you don’t keep a careful eye on your turnover then you might not notice when it creeps over the VAT registration threshold. You can be sure the taxman will though and failure to properly register could result in a nasty fine for your business. The obvious advantage of voluntary VAT registration is you won’t have to worry about passing the threshold or notifying HMRC in time. You can voluntarily register for VAT whenever you want to.
Boosting Your Business Profile
Starting out as a small business or new limited company it can be tough to compete against the big boys. Most people are aware of the VAT registration threshold, so voluntarily registering your business for VAT might give the impression that your business is bigger and more successful than it actually is.
Easing Business Dealings
Many suppliers and organisations are unwilling to do business with companies and SMEs that aren’t VAT registered. You might find that without the ability to produce a proper VAT invoice many of these people will be unwilling to deal with you. The advantage of voluntary VAT registration is you will be issued with a VAT registration number and can more easily deal with external businesses.
VAT Refunds
Another advantage of voluntary VAT registration is the ability to claim VAT on goods and services purchased for your business. If you are selling one sort of VAT Rated product (e.g. zero rated) while buying another (e.g. standard rated) you may actually receive money back from the HMRC in VAT refunds!
Reclaiming The Past
Voluntary VAT registration allows you to reclaim VAT from the last 4 years. So if you’ve been in business for a while, but not yet reached the threshold you can still reclaim VAT as long as you have kept the proper VAT records and invoices.
VAT Registration Number
Voluntary VAT registration means you’ll get a VAT registration number for your business. You can (and should) display it on your business website, stationery and correspondence. It will instil faith in your business and give your business a professional touch.
How To Register For VAT
You can directly register your business for VAT with HMRC. However because of the problems and issues associated with VAT registration the majority of people find it easier to use an agent. As a company formation agent we have plenty of experience helping people voluntarily register for VAT and getting the registration done correctly the first time. You can have peace of mind knowing that your business will be properly VAT registered and you can start taking advantage of the benefits.
Beyond VAT Registration
Once voluntarily registered for VAT you need to abide by the same rules as another other VAT registered business. This means keeping proper records, invoices and submitting a VAT return every quarter. This might be seen as one of the disadvantages of voluntary VAT registration, but in truth it is one small hurdle.
The good news is, our start-up and fixed fee accountancy services include support with filing VAT returns and can be tailored to suit your business. So there is nothing to lose in voluntarily registering your business for VAT.
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Lanop Business and Tax Advisorslove helping new startup businesses succeed. We provide comprehensive services from Company formation, support with raising finance, opening bank accounts, and developing business plans to monthly management accounts to help make key business decisions and meet all the requirements for a successful startup, and we have helped numerous companies.
Our experienced financial consultants proudly serve in Putney, Harley Street, and Battersea. Our physical offices are in Southwest and Central London. Whether you require financial consultancy, assistance with tax matters, accounting solutions, or strategic business advice, our experienced team is here to support you every step. We value the trust you have placed in us and are dedicated to fostering long-term relationships built on professionalism, reliability, and exceptional service.
About the Author:
AURANGZAIB CHAWLA
Aurangzaib Chawla is a UK-based tax advisor and Managing Partner at Lanop Business & Tax Advisors.
With nearly two decades of experience, he supports individuals, landlords, and SMEs with proactive tax planning and compliance. Known for simplifying complex tax legislation, Zaib helps clients minimise liabilities while building sustainable, tax-efficient strategies for long-term success.
Let’s talk through your options, no jargon, no pressure.
About the Author:
AURANGZAIB CHAWLA
Aurangzaib Chawla is a UK-based tax advisor and Managing Partner at Lanop Business & Tax Advisors. With nearly two decades of experience, he supports individuals, landlords, and SMEs with proactive tax planning and compliance. Known for simplifying complex tax legislation, Zaib helps clients minimise liabilities while building sustainable, tax-efficient strategies for long-term success.
Let’s talk through your options, no jargon, no pressure.
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