The 4 Big Benefits of Being Vat Registered
There are four big benefits to being VAT registered that small businesses can voluntarily enjoy. Presently, UK based companies only have to register for VAT if their turnover is £83,000 or more per year.
The Government levies VAT (Value Added Tax) against goods and services within the UK. The current VAT rate is standard 20%, reduced rate 5%, and zero rates 0%.
The standard rate of VAT will apply to most goods and services sold. The reduced rate will apply to businesses like children's car seats and energy providers. Zero rates will apply to food and children's clothes.
So if you are a small business, how can you benefit from being VAT registered?
1. You get a VAT registration number
This may not seem too exciting, but your business can benefit from displaying your VAT registration number on all your documents, website, and stationery. This can add credibility to your business and give you a more trustworthy and professional image.
2. You can claim VAT refunds
Once registered, you can reclaim for VAT on all goods and services your business buys. This must be balanced with what your business is charging and receiving in VAT payments over the year. If you have invested in equipment, plant, machinery or IT, you may be able to reclaim a large amount of VAT.
When it is time to submit your VAT return, you may find that the HMRC sends you some money for a change!
3. You can reclaim VAT from the past
By registering for VAT, you may be eligible to claim for VAT from the past 4 years for items that you are still using. This would require you being in business for this length of time and having kept VAT invoices and records for the period.
4. You can improve your business image
If you are a new small business, another benefit to being VAT registered is that most people are aware of the VAT threshold. You then appear to your potential customers that you are bigger than you actually are by displaying your VAT number.
This may also help you when it comes to dealing with other businesses. Some businesses prefer it if you can raise a valid VAT invoice.
The Bottom Line
These four big benefits to being VAT registered may appeal to you as a small business. However, remember that you will have to keep accurate records and submit regular VAT returns. There are many software solutions to assist with VAT or your accountant can help.