HM Revenue and Customs (HMRC) has introduced the VAT Registration Estimator, a tool to help businesses understand the implications of VAT registration and its impact on profits.

Key Points

VAT Registration Requirements:

• VAT taxable turnover over £90,000 in the previous 12 months (increased from £85,000 on 31 March 2024).
• Expected turnover to exceed £90,000 in the next 30 days.
• Overseas businesses supplying goods or services to the UK must register, regardless of turnover.

VAT Obligations:

• VAT-registered businesses must charge VAT on eligible sales and can reclaim it on eligible purchases.
• Approximately 300,000 new VAT registrations annually.

Estimator Functionality:

• Shows potential VAT registration impact.
• Links to more information about the registration process.
• Useful for businesses below the threshold considering voluntary registration.

Using the VAT Registration Estimator:

• Requires business income, costs, and applicable VAT rates.
• Input data such as business location, income, and costs for up to 12 months.
• Guidance provided for VAT rates and VAT inclusion in selling prices.
• Save and print results.
• Free and accessible through Gov.UK, takes around 20 minutes to complete.

Tool Limitations:

• Guidance tool, not for bespoke business advice.
• Do not record input details, sessions end after 15 minutes of inactivity.

Upcoming Webinar: Live webinar on 24 July 2024 to explain tool usage, with recordings available on demand.

VAT-Registered Business Responsibilities:

• Charge VAT on sales of VAT-liable goods or services.
• Reclaim VAT on purchases from VAT-registered businesses.
• Pay difference to HMRC if VAT charged exceeds VAT paid.
• Claim VAT repayment if VAT paid exceeds VAT charged.

Registration Process:

• Requires Government Gateway user ID and password.
• Most businesses must keep digital VAT records and use software for VAT returns.
• Quarterly VAT returns submission.
• VAT registration threshold at £90,000 and deregistration threshold at £88,000 from 1 April 2024.