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What Is The VAT Threshold, And Should I Register For VAT Even If I’m Below It?

What Is The VAT Threshold

A Paramount Customer Asks: I have already registered my company with Companies House, but we have not reached the VAT turnover threshold. Can I still pay for the VAT registration with yourselves, and what will I need to provide you with to begin the process? 

What Is The VAT Threshold For Turnover?

[Updated]: As of 2017, the VAT threshold is £85,000, and remains so in 2023. this is considered the VAT threshold. You VAT taxable turnover is the total of everything that isn’t VAT exempt. This could include:

  • Goods you hired or loaned to customers
  • Business good used for personal reasons
  • Goods you’ve bartered, part-exchanged or given as gifts
  • Services you may have received from businesses in other countries that you had to ‘reverse charge’
  • Building work over £100,000 your business did for itself.

It’s worth noting that this applies to turnover, not profit, so in general it’s advised that a company registers quickly.

Can You Register For VAT Despite Being Below The Turnover Threshold?

Many companies choose to voluntarily register for VAT before they reach the threshold. This is a big decision and shouldn’t be taken lightly as it will have financial implications for your company. Once you are registered you will need to begin charging VAT on your goods and services, this is known as output tax.

If you fail to research it correctly, you may end up paying more. This would happen if your output tax (the VAT you charge) exceeds your input tax (the VAT you pay). If this happens you will need to pay the difference to HMRC. There’s also the problem of increased paperwork. For example, you will need to file a quarterly VAT return and implement VAT accounting into your existing accounts and reporting. This is important to get right and keep up to date as failure to do so may result in penalties.

What Are The Advantages Of VAT Registration, If You're Below This Threshold?

However, it’s not all doom and gloom and registering for VAT before you reach the threshold can have some persuading benefits.

  • Reclaiming VAT

Although you will need to charge VAT on your goods, you’ll also be able to claim VAT back that you might be charged from other businesses. As long as your input tax exceeds your output tax, you will be able to reclaim the difference back through HMRC.

  • Building impressions

It’s no secret that the VAT threshold is £85,000 and customers and clients will no doubt be aware of this. Therefore, if you’d like to appear bigger than you actually are, registering for VAT and therefore charging VAT will give off that impression. It’s typically used as a trust-building technique, particularly helpful if you’re a new business just starting out.

  • Prevention of penalties

Simply put, if you register for VAT before you hit the threshold you avoid incurring penalties if you don’t notice that your turnover has reached £85,000.

What Do Would You Need To Provide For Paramount To Register For VAT?

To get VAT registered all you need to do is purchase our VAT Registration package, which only costs £23.99 plus VAT. With 25 years of experience, we can process your VAT application form quickly and efficiently.

You will need to provide details such as your turnover, business activity and bank details, and after that we can take care of the rest!

For more information on how we can help, please don’t hesitate to get in touch.

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