The subject of registering a new business for VAT typically falls within two broad categories; compulsory and voluntary registration.
Applications for VAT registrations are made to Her Majesties Revenue and Customs (HMRC) using their online submission services. Whilst the average turnaround period from application to confirmation is approximately 4-8 weeks, individual petitions can be completed either side of this time guideline.
HMRC judge each application on its unique merit and consider business type, location of operations and the directors, industrial sector and other variables.
Compulsory VAT registration is required when a business reaches a pre-determined taxable turnover level; currently £68,000 in the 2011/2012 fiscal year.
Where a business anticipates that their taxable turnover will breach this amount, they must apply for VAT registration. Once acceptance of their application has been received they must begin accounting for VAT on their taxable sales, in most situations charging the standard VAT rate of 20%.
Even in situations where the limit breach is not anticipated, once it is evident that taxable is above the £68,000 per year threshold and VAT registration application to HMRC should be forthcoming.
The other instance for registering a business for VAT is that of undertaking the application process voluntarily. Voluntary VAT registration is often carried out by organisations who wish to reclaim tax on purchases they make in the initial stages of starting a new business.
Other businesses might attempt to portray themselves as being larger than they actually are by voluntarily registering for VAT, thereby suggesting that their taxable turnover exceeds the £68,000 boundary.
Upon completion of registering a business for VAT, that organisation is then bound to submit quarterly returns to HMRC detailing the culmination of their sales, purchases and the association VAT elements.
Businesses often request that they quarterly VAT returns are coterminous with their financial year end so that any creditor or debtor relating to VAT is detailed ready for the statutory accounts.
Registering a business for VAT does create an additional administrative burden upon the enterprise which should not be underestimated. A strict penalty regime exists and the results of missing several reporting deadlines can be arduous for the business.
