What is VAT Registration?
VAT registration is the process of adding a business to HMRC's VAT system, giving it a VAT number and requiring it to charge VAT on taxable sales, submit VAT Returns, and keep VAT records. Once registered, a business can also generally start reclaiming VAT on eligible purchases.
Do I need to register for VAT?
You need to register for VAT if your VAT-taxable turnover has exceeded the registration threshold in the past 12 months, or if you expect it to exceed the threshold in the next 30 days alone. This is a compulsory registration requirement, and registering late can result in penalties, so the position should be monitored on an ongoing basis rather than only at year end.
Can I register voluntarily?
Yes. A business below the threshold can still choose to register voluntarily. This is common where a business mainly sells to other VAT-registered businesses, since those customers can reclaim the VAT charged to them, or where a business wants to reclaim VAT on startup costs before it reaches the threshold.
When should I register?
For compulsory registration, you must register within 30 days of the end of the month in which you exceeded the threshold, or, where you expect to exceed it within the next 30 days alone, before that 30-day period ends. For voluntary registration, you can generally choose the effective date, although HMRC needs to agree it.
What counts towards the VAT threshold?
Your VAT-taxable turnover counts towards the threshold, which includes standard-rated, reduced-rated and zero-rated sales. VAT-exempt sales are generally excluded. This is worth checking carefully, since it is common for business owners to look at total revenue or accounting turnover instead, which can give a misleading picture of where they stand against the threshold.
What happens after registration?
Once registered, HMRC issues a VAT registration number and confirms an effective date of registration. From that date, the business must charge VAT on its taxable sales, issue VAT invoices, keep digital VAT records, and submit regular VAT Returns, usually quarterly, under Making Tax Digital.
Can a startup register for VAT?
Yes, a startup can register for VAT from day one if it chooses to, even with no sales yet, or it may become required to register once its taxable turnover crosses the threshold. Many early-stage businesses register voluntarily to reclaim VAT on setup costs such as equipment, professional fees, and software.
Can I reclaim VAT from before registration?
In some circumstances, yes. VAT incurred on goods purchased up to four years before registration, and VAT on services received up to six months before registration, may be reclaimable, subject to conditions such as the goods still being held by the business and used for taxable purposes. Good record-keeping before registration makes this significantly easier to support.
What happens if I register late?
Registering late means the business is treated as VAT-registered from the date it should have registered, and it may owe HMRC the VAT it should have charged during that period, even if it did not collect it from customers at the time. Late registration can also trigger a penalty, calculated with reference to how late the registration was and the VAT owed, so it is worth addressing as soon as it is identified rather than waiting.
VAT registration for US and international businesses entering the UK
The position is different for businesses that are not established in the UK. HMRC treats a non-established taxable person differently from a UK-based business, and in many cases an overseas business making taxable supplies in the UK must register for VAT regardless of its turnover, without the benefit of the £90,000 threshold that applies to UK-established businesses. Because these rules depend heavily on the specific facts, including where a business is established and the nature of its UK activity, US and other international businesses planning to trade in or expand into the UK should take advice on their VAT position early rather than assuming the standard threshold rules will apply to them.
Related terms: VAT, VAT Registration Threshold, VAT Return, Taxable Turnover.
VAT rules depend on the nature of transactions and individual circumstances. This glossary provides general information and is not personalised tax advice.