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Beware the VAT Threshold

Even if your business is not registered for VAT, you need to be aware of the point where your total sales require you to become VAT registered. This threshold is currently set at total sales of £68,000 for any 12 month period ending on or after 1 May 2009.

If your annual sales are near this limit you need to calculate your total turnover for the last 12 months, every month, adding the latest month and subtracting the earliest month each time, to check you haven’t breached the threshold. Alternatively, if you believe your sales for the next 30 days will exceed £68,000 you must register for VAT immediately.

There are several advantages of keeping your sales below the VAT threshold:

  • - You don’t have to register for VAT, but you can if you wish to.
  • - If you are not registered for VAT, your customers do not pay VAT on top of your basic prices. This makes your goods and services appear to be better value for money for non-business customers or other small non vat registered businesses.
  • - On your 2009/10 self-assessment tax return, which will be issued in April 2010, you will only have to complete three lines to report your business profits.
  • - You do not have to submit your VAT returns online. Currently a small percentage of VAT-registered businesses submit their VAT returns online each quarter. But for periods starting after 31 March 2010 all VAT-registered businesses with a turnover of £100,000 or more will be compelled to submit their VAT returns online. Also any business that becomes VAT registered after 31 March 2010 will also have to submit all their VAT returns online, whatever its turnover.
    If you become VAT registered before 1 April 2010 you will not be forced into online filing straight away, as you will be able to continue with paper VAT returns until your turnover exceeds £100,000, or the law is changed.

There are of course penalties for failing to register on time so please monitor your turnover carefully and make your decision to register for VAT in good time.

This entry was posted on Monday, June 8th, 2009 at 3:26 pm and is filed under Features. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Responses to “Beware the VAT Threshold”

  1. Colin M Day Says:
    March 24th, 2010 at 11:54 am

    Once sales are expected to exceed the VAT threshold in any consecutive 12 month period VAT registration should take place, and VAT should be charged on all goods and service supplied from that date, but not back dated on goods or services provided before the Registration date. Am I correct?
    Further, must VAT be charged on goods or services previously advertised exempt of VAT?

  2. John Hughes Says:
    March 25th, 2010 at 1:50 pm

    Yes you are correct. It is only from the registration date that you have to charge VAT and account for it.
    you do not have to charge VAT on sales previously made but you may be able to recover significant amounts of input VAT back on stock still held and equipment purchased.

  3. Jon Kington Says:
    June 28th, 2010 at 7:17 am

    The threshold mentions £68000. Is this figure exc vat or inclusive of vat ?

  4. John Hughes Says:
    June 28th, 2010 at 8:58 am

    From 01/04/2010 the threshold is now £70,000 and is for the amount of sales made in total. So if make a 1001 sales of £70 in 12 months then would need to register.

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