If you are a trader in the UK then you will need to apply for vat registration after crossing vat registration threshold limit set up by Her Majesty’s Revenue and Customs or hmrc department. Once you turn into a vat registered trader then you will need to follow specific vat rules laid down by hmrc vat.
Although almost all eu countries including the UK, Poland, Italy, Germany, Greece, Sweden, etc have adopted vat or value added tax to boost tax revenues and minimize tax losses, each country has set its own vat threshold after which a trader has to enter the system of vat. In the UK this threshold limit is achieved once your taxable sales in the previous 12 months have touched £70,000 or if you expect this figure to be touched within the next 30 days. In case you take over a business that is not vat registered and the combined taxable sales of your own business along with the new business cross over the vat threshold limit then you will have to go in for vat registration.
Even if you import goods from other eu countries that cross over the threshold limit or export goods to other countries above that limit then you will still need to get vat registration and turn into a vat registered trader. If, however, you have temporarily crossed over the vat threshold limit and do not expect to cross over the limit again then you can be granted temporary exemption provided you can convince hmrc that your taxable sales will drop below the de-registration limit of £68,000 in future.
However, you should remember that since the standard vat rates are slated to change from 17.5% to 20% from January 4, 2011, the vat registration threshold too will be changed accordingly. You will need to keep in touch with hmrc or consult an expert vat agent to find out the new limit, especially if you foresee your taxable sales touching the threshold limit by the start of next year. In case you feel that you need to get your vat certificate immediately after starting your business and want to issue vat invoices to your clients then you need not wait to touch the threshold limit at all and can even apply for vat registration once you start your new business.
There are several other conditions whereby you can get included or excluded from VAT registration and your vat agent could guide you ahead depending on the conditions under which you run your specific business. If you turn into a vat registered trader then this would enable you to enjoy all benefits offered by vat such as applying for vat reclaim or vat refund. You will also need to follow all uk vat laws, issue vat invoices, file regular vat returns and maintain all required vat documents once you get your vat certificate and vat number. However, if you try to avoid vat registration by splitting up a single business into smaller businesses then you might even attract a penalty in case hmrc concludes that you have done so simply to avoid entering into the system of vat.
You will need to keep an eye on your taxable sales if you have started a new business and also on the vat threshold limit at the start of next year so as to confirm your entry into the system of vat. Once you achieve the vat registration threshold limit set up by hmrc then you will need to fill up the applicable vat registration form to turn into a vat registered trader in the UK.