Vat registration for new limited company

boongywoongy

I am about to incorporate a limited company which will certainly exceed the 82k VAT taxable turnover within 12 months.

My question is whether I should register for VAT immediately after the company incorporation or wait until the month approaches when I actually exceed the 82k limit to register?

Thanks in advance for any responses.

InsideInsurance

Are your customers businesses that are also VAT registered?
Are you selling zero rated products?

If either of the above are "yes" then you generally should register irrespective of turnover.

If both answers are "no" then its preferable not to register. Last time I checked the requirement was based on prediction based on a rolling year. Personally I dont know how well enforced this is or tested. Now clearly if in your first month you sell £81,999.99 it'll be hard to defend that you arent sure if you will make it to £82k within a rolling year but there is a much stronger case to say that you cannot predict turnover even before you start unless you have some totally insane marketing budget etc.

paddyrg

I'd register, may as well benefit from recovering vat on your startup costs and there's no point having to hike your prices partway through the year (for non-registered customers) when you know you're going to be at that level anyway.

martindow

Can you be certain that the business will turn over more than £82k or is this based on a business plan?

Provided you do not come into the categories as set out by Inside Insurance I would hold off and see what happens.

Aquamania

InsideInsurance wrote: »

Are your customers businesses that are also VAT registered?
Are you selling zero rated products?

If either of the above are "yes" then you generally should register irrespective of turnover.

If both answers are "no" then its preferable not to register. Last time I checked the requirement was based on prediction based on a rolling year. Personally I dont know how well enforced this is or tested. Now clearly if in your first month you sell £81,999.99 it'll be hard to defend that you arent sure if you will make it to £82k within a rolling year but there is a much stronger case to say that you cannot predict turnover even before you start unless you have some totally insane marketing budget etc.

Current rules on VAT registration here:
https://www.gov.uk/vat-registration/when-to-register

In general terms you don't have to register until your VAT taxable turnover exceeds £82k in any 12 month period.
Then you have 30 days to do so.

(Or you voluntarily register earlier)

Note there's also an exemption possibility if it's an odd occurence. You need to request it and demonstrate your VAT taxable turnover will not exceed the deregistartion limit of £80k in the next 12 month period.
HMRC will then either grant the exception, or register you anyway.

phill99

Being someone that has gone down this journey, you will be best suited to register now so that ypu don't have a 20% hike in prices in 4months time and then spend the next 2 months having to explain this to your customers.

prowla

Register straight off - it means you can offset the VAT in your costs.

Pennywise

Really depends on your business. If you're selling to domestic customers, i.e. a cafe, shop, garage, plumber, decorator, etc., then unless you have very high start up costs, far better to wait until you have to register, otherwise you'll be paying VAT on your profits.

If you're selling to other businesses, then the opposite, far better to register early as your customers claim back vat anyway.

The issue of having to change pricing in the future if you become VAT registered is irrelevant if, say, you're a shop or cafe, as you set your prices from day one. You make extra profit until you're VAT registered. You'll be setting prices at market level which is the same either way.

On a different track, are you likely to be making a profit or a loss at first? If loss making, probably best to register for VAT as your expenses are higher than income. (Only if most expenses are VATable though, not if they're wages!).

boongywoongy

All excellent replies and much appreciated. After considering them all, my preference is to register for VAT immediately. Thank you all.

zygurat789

phill99 wrote: »

Being someone that has gone down this journey, you will be best suited to register now so that ypu don't have a 20% hike in prices in 4months time and then spend the next 2 months having to explain this to your customers.

Why would you have a 20% hike in 4 months time?
If you can't see the answer perhaps you should rethink your ideas.

Aquamania

zygurat789 wrote: »

Why would you have a 20% hike in 4 months time?...

Well it's either that or a 16.7% deduction in turnover in 4 months time :cool:
(assuming no change to sales volumes, and therefore costs)