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:
Choosing a VAT scheme to account for VAT should generally be considered separately from registration itself.
Barry J Nudds Accountants
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56, Hepworth Avenue, Bury St Edmunds, Suffolk, IP33 3XS