Should I register for VAT?

laurajayne

I run a cake business which currently has a small turnover of £1.5k - although I am looking to make it full time, and have a much higher turnover.

Now I've read all the VAT documents, and most of what I sell is zero rated, with the exception of my inedible cake toppers, which I sometimes sell separately. Now I do buy products and services that are normally rated.

So my question is, given that I'll end up paying not a lot to HMRC, is it worth registering for VAT to claim back for what I pay. I can see that if the products that I sold were 'exempt' I couldn't, but it appears that zero rated isn't the same.

I understand that they may refuse my application, but is it worth applying for it in the first place?

Many Thanks

paulwf

I've come across this before in catering where there are some niche markets where you buy mainly VAT items and services and turn them into non-VAT items. To me it makes perfect sense to register as you will always be in a refund situation with HMRC. If you have a legitimate business setup I can't see why HMRC would refuse the application, they can't turn you down just because they don't want to give a VAT refund

Please understand I'm not an accountant though and you should take advice from one first as there are several VAT schemes in operation. I also probably wouldn't bother for your current turnover but if you plan to grow it makes sense to do it before you start getting lots of equipment.

martindow

Maybe you should bear in mind that the government may close the cake and biscuit VAT anomaly where some products are liable and other very similar products are zero rated. This might not last for ever. Having to add 20% to your prices soon after registration while you are well under the threshold would not be good.

Premier_2

If the goods you provide are currently zero rated, yet the goods and services you purchase are rated at a higher vat level, then I would seriously consider registering; you could be missing out recliming on that VAT you are paying.
(You need to offset that against the added burdon that being VAT registered incurrs, e.g. submitting VAT declarations)

If a change in the law occurs that means your items become liable for a higher rate of VAT, and your annual turnover is still low, you could always regesister for VAT at that time.