Why voluntary register for vat

In the case of the rolling month historical test, the registration date is the first day of the second month after the limit has been exceeded. This might give scope for a windfall of input tax — and the four-year window for input tax gains could be extended by pre-registration claims as well see below. A common question relates to VAT returns for a retrospective registration. HMRC will issue a single long period return for the retrospective period rather than divide the period into quarters and ask for many different returns to be submitted.

As a final tip, ensure the requested date of registration is correct on the initial VAT1 application form. This is a tricky aspect of VAT accounting and is best explained in Example 2.

Mary is a self-employed tax consultant who provides services to one customer, a firm of accountants called Hyde and Co.

She has retrospectively registered for VAT on a voluntary basis from her first day of trading and must submit a month return to HMRC for the period to 30 September It is now November Hyde and Co will claim input tax on the VAT return that includes this date.

Note The above process is important in the case of compulsory registrations backdated retrospectively, where a business might be faced with a late registration penalty based on the tax due in the late period.

So a correct adjustment as above will reduce output tax in the late period and reduce the potential penalty. A welcome opportunity for a newly-registered business is to claim input tax on particular pre-registration expenses:. A recent challenge on this subject has highlighted how HMRC expect a depreciation adjustment to be made to reflect the use of goods in the pre-registration period see Example 3. Bob the builder became VAT-registered on 1 October because he exceeded the registration threshold on 31 August Meet the team.

Case studies. Privacy policy. We also have a London office. The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct? It is unlikely you will need this service, unless you are voluntarily registered for VAT. Who can register for VAT? You can register for VAT if you are in business as: a sole trader a partnership a club an association a limited company One of the false!

It is a product or service which is subject to tax. Turnover is the total amount of sales, before any expenses or other deductions are made. A business which regularly pays more VAT to suppliers than it would collect from customers if it registered, could benefit from voluntary VAT registration.

About The Author Elizabeth Hughes A content writer specialising in business, finance, software, and beyond. Inline Feedbacks. Read more posts We… Read More.

Your asset should also grow in value,… Read More. Back to Blog Contact Telephone: info theaccountancy. Alternatively you can give us a call on It makes no difference whether you registered voluntarily or reach the threshold. Hi, If you have made absolutely no sales then there would have been no VAT to collect and nothing to pay to the taxman. You will still need to complete a VAT return to show this and establish that you do not owe anything.

I am starting an e-shop, where many of my items will be coming from China, and therefore will be liable to import tax, duty and I think automatically the corresponding VAT of China. Can you advice me? Also, my sales white paints include other EU countries, mostly governmental bodies like a supplies for a municipality etc , which are by definition no oblige to pay VAT.

Hi Georgie, This is an area where you really need to speak to an accountant and check exactly what you will be able to claim back in terms of import duties etc as this is a fairly complex and specialist area. If you want to give us a call on we can try and give you some more detailed information. Because I just found out my big misunderstanding that voluntary registration also means charge no tax.

Can you help me to solve following issues: 1. The amount I submit is difference between output tax and input tax or tax rate x revenue? Hi, You are really going to need to speak with a qualified accountant about this.

We can arrange this if you give us a call on However the general principle is that once you are registered whether voluntarily or not for VAT you need to charge VAT on any sales you make. Also, if the total expenses are anticipated to exceed the threshold in the next 12 months including the current month, you will be allowed to voluntarily register. In simple words, you can apply for VAT registration even if your outward supplies sales are not exceeding the threshold, but expenses do so.

Now, when you apply this from the context of a new business that is just started or a start-up establishment, usually you have a huge expense incurred as you start, and it takes a while for your sales to pick up. The element of expense in voluntary registration is included to help the businesses to take benefit of input vat deduction.

Input vat deduction can be claimed by business who are registered under VAT. The reason being, if you are unregistered, VAT paid on purchase should be treated as cost and you are left with no option but to inflate the price. If you observe the unregistered business, the cost is which includes the VAT.

The reason being, as a unregistered business, the law does not permit him to claim input vat deduction on purchase and as a result, it is added to cost. Thus, the selling price is more than the registered business.