Today it was reported that Vince Cable, the Business Secretary, was fined £500 for failing to register for VAT on time. He, of course, has blamed his accountant which is fair enough if he used Caprica Online we wouldn’t have let it happen.
So here’s a quick reminder of what you need to do to avoid making the same mistake:
1. Check the VAT registration threshold
Right now (2011/12) the VAT registration threshold is £73,000. It changes most years though (possibly decided by Vince Cable?!) so check you are using the right figure on the HMRC website. If you exceed the threshold due to something that can be proven to be temporary you may be able to avoid registering though speak to an accountant first.
2. Look backwards 12 months
If your turnover of VAT taxable goods and services (supplied in the UK) was above the threshold then you must register for VAT in the next 30 days. This is where Vince went wrong. He earned £192,000 in a year through freelance work without bothering to register.
3. Look forwards 30 days
If you expect to provide VAT taxable goods and services exceeding the threshold in the next 30 days then you must also register. If you you haven’t billed that much in the last 12 months it is unlikely this will be the case. The rule exists so Vodafone can’t set up a new company tomorrow, transfer millions of customers to it and get a year off paying VAT.
How to register
You should already be set up with HMRC for self-assessment or corporation tax, if so VAT registration is simple. Just log into your HMRC online page and click register for VAT. It will then ask you a load of mostly self-explanatory questions about the nature of your business and historical/forecast billings. If you are in a business that is considered particularly risky from a VAT perspective (eg property) then HMRC may send you a another questionnaire before giving you a VAT number.
Alternatively, if you have an accountant they should be able to do all this for you.
You may also want to consider registering for the VAT flat rate scheme. See our post Will registering for the VAT Flat Rate Scheme be beneficial for you?