Blog VAT Status And You: Why It’s Good To Register Early
By April 25, 2018|on
With the new tax year having just begun, now is a great time to think about your business’ finances. This includes your ‘VAT status’: whether or not your business is registered for VAT.
Registering for this is required for those whose VAT taxable turnover is over the threshold of £85,000 in any 12-month period. However, you can still register for VAT even if your business is below this amount, and many SMEs choose to do so due to the benefits it brings.
Here, we go through the advantages of registering early for VAT.
It strengthens your reputation
Giving the impression that you have a turnover of more than £85,000 can make your business seem like it’s bringing in more than it is. This will enhance your business’ reputation, making customers see you as an already proven success and therefore one they would want to work with.
Your VAT status can be clearly demonstrated by displaying your VAT number on your website or on marketing materials such as letters, leaflets and pens. Upon seeing this, potential customers are likelier to place trust in your company, even if they have had minimum contact with you.
It shows foresight
Although you are not yet above the threshold, it may be that your business exceeds this amount in the future. Early VAT registration will illustrate that you have foresight and are thinking about your business in the long term, rather than simply ‘plodding along’. If you provide products or services on a continuous basis for clients, then being VAT registered is an excellent way to show them that your business is unlikely to be disappearing anytime soon, and that they can rely on you.
The monetary benefits that come with a VAT registered status will also show that you are thinking of your business’ future. You can claim back VAT on not only the purchases you make further down the line, but also for some historic goods and services too. This can result in a tax refund, meaning you’ll have more money to invest back into your business which proves your desire for growth.
It demonstrates your financial skills
If you are expecting to go above the threshold within the next 30-day period, registering for VAT now will show your financial skills as you will be required to register for VAT at this point. This also benefits you financially because if you do not register within 30 days of surpassing the threshold, you could potentially receive a penalty. This will be determined by the amount you owe and the lateness of your registration.
There is also the option of registering for the VAT Flat Rate Scheme if your turnover is £150,000 or less. Under this scheme, a fixed rate of VAT is paid to HMRC, making it simpler to work out your responsibilities. However, not all businesses can benefit from this scheme. In April 2017, the government brought in changes that meant that limited cost traders would pay 16.5% – a higher rate than for any other type of business. Limited cost traders are defined as those whose VAT inclusive cost of goods are either less than £1,000 or less than 2% of their turnover.
Talk to the Bright Ideas pros about VAT
Any topic relating to tax just isn’t that easy to understand unless you’re an expert accountant like those that make up the Bright Ideas team. If you have any questions about registering for VAT and how much you will be required to pay and charge, speak to us.
Get in touch with us today by calling 0161 669 4221, emailing email@example.com, or filling in our online contact form.