If you have crossed the VAT threshold limit or want to become a part of the vat or value added tax system then you will need to apply for registration for vat to turn into a vat registered trader. Once you turn into a vat registered trader then you will be empowered to reclaim vat paid in another eu country and thereby lower your costs as well as improve your business cash flow.
Several eu countries including the UK, Spain, Poland, Sweden, Italy, Germany, etc have moved over to vat for taxing goods and services. Vat is thus followed even while trading between member eu countries. If you have started a new business in the UK and have touched £70,000 pounds in taxable sales in the past 12 months then you can apply for vat registration with the HM Revenue and Customs or hmrc department. You can even apply before this threshold limit is achieved if you sell your goods or services to mostly vat registered traders. Vat registration can be done as an individual, partnership, company, trust, etc as deemed fit by the hmrc department.
However, once you apply for vat registration then your costs could increase slightly, and if you sell your goods and services locally in the UK at a retail level then you could opt to remain outside of vat if you only sell vat exempt goods. However, if you try to artificially try to separate your business activities simply to remain outside the system of vat then the hmrc vat department might not take your actions lightly in case you are discovered doing the same. There are several advantages of entering the vat system since it will avoid the problem of double taxation by allowing you to reclaim vat already paid on goods or services in another country too.
The entire process for registration for vat is quite simple but if you are not sure about yourself then you should simply appoint an expert vat agent to handle all vat matters. The hmrc vat department offers several vat online services including applications for registration for vat. You can apply for vat through your vat agent too provided you inform the department of your choice. Once you apply for vat registration then the process of approving your application usually takes between 10 to 30 days. Until then you can continue issuing regular invoices to your clients. However, during that period you will need to factor in applicable vat rates and re-issue those invoices issued after your application so that your clients can reclaim vat from their end.
Once your application is approved then you will receive your unique vat registration number and will need to display it on all vat documents including your vat invoices, vat returns, and vat refunds. You will also need to issue a vat invoice that separately shows all vat rates applied in that invoice along with your vat no at the top. You will need to provide a summary of all vat paid and collected in your vat returns that will need to be filed periodically as required by the hmrc vat department. If you have already paid vat on goods and services in another eu country then you can try for vat reclaim once you are an official vat registered trader.
Vat registration is a simple online process that needs to be done first if you want to turn into a vat registered trader in the UK. You can simply fill up the online vat registration form and submit it to the hmrc vat department when you apply for registration for vat.