Essential Guide to VAT Registration in the UK

When to register for VAT
You must register if:

  • your total VAT taxable turnover for the last 12 months was over £90,000 (the VAT threshold)
  • you expect your turnover to go over £90,000 in the next 30 days

You must also register (regardless of VAT taxable turnover) if all the following are true:

  • you’re based outside the UK
  • your business is based outside the UK
  • you supply any goods or services to the UK (or expect to in the next 30 days)

You can choose to register for VAT if your turnover is less than £90,000 (‘voluntary registration’).

You must pay HM Revenue and Customs (HMRC) any VAT you owe from the date they register you.

Calculate your turnover
Taxable turnover is the total value of everything you sell that is not VAT exempt or ‘out of scope’ goods and services.

It also includes:

  • zero-rated goods
  • reduced-rated goods
  • standard-rated goods
  • goods you hired or loaned to customers
  • business goods used for personal reasons
  • goods you bartered, part-exchanged or gave as gifts
  • services you received from business in other countries that you had to ‘reverse charge’
  • goods and services which are subject to the ‘domestic reverse charge’
  • building work over £100,000 your business did for itself

If you exceeded the threshold in the last 12 months
You must register if your total taxable turnover for the last 12 months goes over £90,000.

You have to register within 30 days of the end of the month when you went over the threshold. Your effective date of registration is the first day of the second month after you go over the threshold.

Example
On 15 July your total taxable turnover for the last 12 months is £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August. Your effective date of registration is 1 September.

If you’re going to exceed the threshold in the next 30 days
You must register if you realise that your total taxable turnover is going to go over the £90,000 threshold in the next 30 days.

You have to register by the end of that 30-day period. Your effective date of registration is the date you realised, not the date your turnover went over the threshold.

Example
On 1 May, you arrange a £100,000 contract to provide services.  You’ll be paid at the end of May.  You must register by 30 May.  Your effective date of registration will be 1 May.

If you take over a VAT-registered business
You must register for VAT if the combined taxable turnover of the new business and your existing business is over the threshold.

Late registration
If you register late, you must pay VAT on any sales you’ve made since the date you should have registered.

You might need to pay a penalty, depending on how much you owe and how late your registration is.

If you go over the threshold temporarily
You can apply for a registration ‘exception’ if your taxable turnover goes over the threshold temporarily.

HMRC will consider your exception and write to confirm if you get one. If not, they’ll register you for VAT.

Exemption from registration
If most of your taxable goods or services have a VAT rate of 0% (zero-rated supplies) you might not need to register for VAT. You’ll need to ask HMRC for permission – this is called an exemption from registration.

If you’re a non-established taxable person, all of your taxable goods or services must be zero-rated in order to be eligible for exemption from registration.

Apply for an exemption from registration either: 

If you dispose of assets and have claimed a repayment of VAT on them, you will need to fill in form VAT1C and the VAT1 registration form.

What happens next
HMRC will write to you to let you know whether your exemption application has been approved. If your application is rejected, HMRC will register you for VAT.

Cancel your registration
You must cancel your registration if you’re no longer eligible to be VAT registered.  For example:

  • you stop trading or making VAT-taxable supplies
  • you join a VAT group

You must cancel within 30 days if you stop being eligible or you might be charged a penalty.

If your VAT taxable turnover falls below £88,000 you can ask HM Revenue and Customs (HMRC) to cancel your registration.

How to cancel
Cancel your VAT registration online.

What happens next
It usually takes 3 weeks for HMRC to confirm your cancellation and the official cancellation date.  This is either the date when the reason for your cancellation took effect (for example, when you stopped trading), or the date you asked to cancel.

HMRC will send confirmation to your VAT online account or through the post if you do not apply online.

You must stop charging VAT from the cancellation date.  You’ll need to keep all VAT records for 6 years.

HMRC will automatically re-register you if they realise you should not have cancelled. You’ll have to account for any VAT you should have paid in the meantime.

VAT after you cancel
You’ll have to submit a final VAT Return for the period up to and including the cancellation date.

You must account for any stock and other assets you have on this date if both of the following apply:

  • you reclaimed or could have reclaimed VAT when you bought the assets
  • the total VAT due on these assets is over £1,000

You must submit your final return within one month of the cancellation date unless you are on the Cash Accounting Scheme.

If you’re on the Cash Accounting Scheme, submit your final return within 2 months of the cancellation date.

Do not wait until you’ve received all your invoices before submitting your final return. When you get them, you’ll still be able to reclaim VAT.