Advantages to registering for VAT early?

catmulogen

Hi, I hope this isn't too simple of a question to ask but..... here goes.

I've decided to set up a small business making and selling items at craft fairs and some other events. I've just put my first order in for some stock which came to around £1,700 including Vat. Now, I know its going to take me some time to break even and make a profit and know I won't reach the tax threshold (probably never!) but, I just keep looking at my invoice and seeing how much vat is included in the price. Would it be a mad idea if I registered for VAT now so that I could claim back the vat paid? Or, considering the small amount, am I just giving myself a headache with paperwork?

Any advice greatly appreciated

Ps I've not actually registered with HMRC yet as I understand you don't have to until you're in profit. Have I got this correct or would you still attempt to register now and explain that profit could be a long way off!

chalkie99

No - bad idea to register at all because although you can then claim back the VAT you have paid for your stock you will then be obliged to charge VAT on your sales which, as they are presumably to the general public, will make your prices higher.

Second point, registering with HMRC - sorry wrong again. Makes no difference whether you make a profit or a loss, you have to register as soon as you begin trading.

catmulogen

Thanks for your speedy reply Chalkie99 - i'll remember you when I make my first million! :rotfl: My husband said it would be a bad idea to register for Vat for the same reason, but I still wanted to check! So glad I put the ps at the bottom of my post too. Going to register with HMRC in the morning.
Many thanks again.

orangeslimes

When you do register for VAT you can still claim back some VAT on certain expenses from 6 months prior to your VAT registration... so if it does happen that your business takes off you may still be able to reclaim some of the VAT
(also might be useful to know VAT registration isn't done by how much profit you make - but your turnover -i.e. if you reach £67000 worth of sales- which sounds unlikely to happen for the sort of business you describe)