Business Glossary

Understanding VAT Registration

Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.

Businesses must register for Value Added Tax (VAT) if they sell their goods and services within the UK and their turnover exceeds a certain threshold. Once registered, businesses must pay VAT on their goods and services to HMRC – a cost that is then passed on to the consumer.

Does my business need to be registered for VAT?

VAT registration is compulsory for all businesses whose turnover exceeds the threshold of £85,000 per year. This applies not only to businesses based in the UK but to any company that trades with the UK. Companies must complete their VAT registration within 30 days of the end of the month when the threshold was exceeded.

How to register for VAT

The fastest and easiest way to register for Value Added Tax is via HMRC’s website. Alternatively, businesses may download the VAT1 form to register by post.

In order to register, you will need:

  • Your National Insurance or Unique Tax Reference (UTR) number

  • Your Company Registration Number if you are a limited company

  • Photo ID if you are a sole trader or partner

  • Your business bank account details

  • Details of any other businesses you have owned in the past 2 years

Upon registration, you will receive your unique 9-digit VAT registration number, which must be included on all future invoices, and confirmed registration date.

VAT returns and accounting

Once registration has been completed, businesses must add VAT to their prices. They must send a VAT invoice when trading with another company that is also VAT registered.

As well as making quarterly payments, they must also send a VAT return to HMRC every 3 months which enables them to reclaim the VAT that they have paid on their operating expenses.

As part of their VAT accounting, they must also keep digital VAT records and retain these for 6 years.

VAT Registration FAQs

Are there any businesses that cannot register for VAT?

Businesses are not eligible for registration if they deal exclusively in goods or services that are VAT-exempt. These may include:

  • Charity fundraising events

  • Education or training

  • Finance, credit or insurance

  • Subscriptions to membership organisations

Can you cancel VAT registration?

Registered companies can cancel their VAT registration if they stop trading, stop dealing in goods and services to which the tax applies or join a VAT group.

Do I need to register for VAT if my business is outside the UK?

Not only must UK businesses whose turnover exceeds the VAT threshold register for VAT but so must foreign businesses that trade with the UK. Therefore, if you do business within the UK you must register for VAT if your turnover exceeds £85,000 even if you or your business are located overseas.

Do I always need to register my VAT if my turnover exceeds the threshold?

Not necessarily. If your turnover temporarily exceeds £85,000 per year but this is an anomaly rather than a trend, you may apply for registration exemption. To do this, companies must write to HMRC and explain why they do not expect their taxable income to exceed £85,000 in the next year.