Aspects of Registration

Barry J Nudds, Chartered Accountants

modern approach - traditional values

 

telephone 01284 625933 or 07847 004490

email enquiries@bjnudds.co.uk

56, Hepworth Avenue, Bury St Edmunds, Suffolk, IP33 3XS

 

VAT Registration

 

Although there is a mandatory turnover limit for VAT, meaning individuals or businesses have to register when turnvocer reaches that limit, there are a number of choices available, including "Intending trader registration" and "Voluntary registration".

 

Intending Trader Registration - Where registration takes place before trading starts.Usually relevant to where heavy costs are incurred over a lenghthy period prior to starting to trade e.g. Kitting out premises. HMRC usually require evidence of intention to trade e.g. committment to lease of premises etc. Advantage - VAT can be recovered on costs as construction costs/development work progresses before starting to trade. Potential Disadvantage - Accounting for VAT on sales from opening the doors and foregoing the period of grace with VAT free sales till the mandatory registration turnover level is reached.

 

Voluntary Trader Registration - When the first sale has taken place that would count as a "taxable" sale i.e. standard or lower rate or zero rate if registered then registration can take place at any time before the mandatory registration turnover is reached and a claim may be made for pre-registration input tax on capital items still on hand at registration and incurred up to 4 years prior to registration, together with input tax on stock items still on hand and some overheads incurred in the 6 months prior to registration.

 

Individual circumstances need to be considered e.g. costs incurred, cash flow, expectation of turnover and VAT rating of sales transactions.

 

Common questions and issues about registering for VAT:

 

  • For Sole Traders VAT registration covers any other source of VAT taxable income that they may have in their own name but has nothing to do with the main business e.g. holiday lets.
  • A similar situation arises for partnerships where the other income producing assets are held in the partners names. A fairly common situation with couples.
  • Early registration can be beneficial if the majority of business customers are VAT registered i.e. Customers can reclaim the VAT charged to them and the business can claim back input tax charged by suppliers.

 

Choosing a VAT scheme to account for VAT should generally be considered separately from registration itself.