VAT is a consumption tax applied to most goods and services in the UK. Businesses act as intermediaries, collecting VAT on behalf of HMRC from customers and paying it on goods and services they purchase. While VAT compliance may seem daunting, it is a key responsibility for businesses that meet specific thresholds.

The primary consideration for VAT registration is the VAT taxable turnover of your business. VAT taxable turnover is the total value of everything you sell that isn’t exempt from VAT.

1. Compulsory Registration Threshold:
   • You must register for VAT if your VAT taxable turnover exceeds £90,000 (current threshold for 2025) in any rolling 12-month period. This is not tied to the calendar year or your financial year but is reviewed on a continuous basis.
2. Expected Turnover:
   • If you anticipate that your turnover will exceed £90,000 in the next 30 days alone, you must also register.
3. Voluntary Registration:
   • Businesses below the threshold can choose to register voluntarily. This can be advantageous for businesses that incur significant VAT on purchases or those dealing with VAT-registered customers who can reclaim VAT.

• Exempt Goods and Services: If your business deals exclusively in VAT-exempt goods or services, you are not required to register.
• Distance Selling Thresholds: For businesses selling goods into the UK from overseas, different thresholds apply under distance selling regulations.

Registering for VAT is straightforward and can be done online through the HMRC website. You will need to provide details about your business, turnover, and nature of your operations. Once registered, you will receive a VAT registration certificate with your unique VAT number, which you must include on all invoices.

After registering for VAT, your business will need to:

1. Charge VAT on Sales:
   • Apply the correct VAT rate (standard, reduced, or zero) to goods and services you provide.
2. Reclaim VAT on Purchases:
   • Offset the VAT you pay on eligible business expenses against the VAT you collect from customers.
3. File VAT Returns:
   • Submit VAT returns to HMRC, typically on a quarterly basis.
4. Maintain Accurate Records:
   • Keep detailed records of sales, purchases, and VAT invoices for at least six years.

Failing to register for VAT when required can result in penalties from HMRC. The penalty is calculated based on how long the registration was overdue and the VAT owed. To avoid this, monitor your turnover regularly and seek professional advice if you are unsure.