Does a new company need to be registered for VAT VAT registration comes with a number of pros and cons. Hopefully these pointers should help you decide whether VAT registration is best when you form your new company. While it should be noted in the UK, you can become registered at anytime, planning in advance can save a lot of hassle, and of course paperwork. A good accountant is recommended as they can talk over the advantages and disadvantages.
What is the projected turnover The projected turnover is above all the biggest factor in deciding whether a company needs to go VAT registered. VAT registration is mostly decided by turnover. And not just for the first year- think long term over three years. 70,000 pounds is the current VAT threshold. If at best you will only ever turn over 20,000 pounds, VAT registration, might not be worth considering. However, if you are anywhere near the threshold, if you don't hit it in year one, you are more than likely to hit it in year two. It makes sense in this scenario to be VAT registered from the start.
Consider your client base
One reason for VAT registration is your client base. Many businesses will be expecting to be charged VAT. They are able to claim it back and does not cost them anything. The turnover of a company can say a lot. So companies may not do businesses with those not VAT registered. On the flip side, if you are dealing with price sensitive home users, they can't claim back VAT. By being VAT registered it can make you more expensive than non registered competitors. Also, with regards to turnover above- the last thing you want to be doing is upping the price because you have to become VAT registered at a later date. Fees for accountancy
Your new company is most likely going to be short of cash and so becoming VAT registered is probably a bill that is not needed. You can perform your own VAT returns online. Although expert advice from an accountant is invaluable for new companies. Your account will know the rules of what you can and cannot claim back. Something you might not be sure on yourself.
Think about if you end up with a VAT inspection?
A good accountant is invaluable if a VAT inspection should occur. Proportions of bills charged VAT
How much are your outgoings and what are would you be saving from being VAT registered?
You did read it correctly, you are able to save money by being VAT registered! While writing this VAT is 17.5% on top of the pricing of the service or product being charged VAT. Should you not be VAT registered, unfortunately you are unable to claim this back. However, as a VAT registered company, you are able to claim this back against whatever VAT you owe when you do a VAT return.Talk to an accountant What I have written above are just a few points to think about when registering your new company. While my advice should be in mind, you should always seek advice from a good accountant while setting up a company.
What is the projected turnover The projected turnover is above all the biggest factor in deciding whether a company needs to go VAT registered. VAT registration is mostly decided by turnover. And not just for the first year- think long term over three years. 70,000 pounds is the current VAT threshold. If at best you will only ever turn over 20,000 pounds, VAT registration, might not be worth considering. However, if you are anywhere near the threshold, if you don't hit it in year one, you are more than likely to hit it in year two. It makes sense in this scenario to be VAT registered from the start.
Consider your client base
One reason for VAT registration is your client base. Many businesses will be expecting to be charged VAT. They are able to claim it back and does not cost them anything. The turnover of a company can say a lot. So companies may not do businesses with those not VAT registered. On the flip side, if you are dealing with price sensitive home users, they can't claim back VAT. By being VAT registered it can make you more expensive than non registered competitors. Also, with regards to turnover above- the last thing you want to be doing is upping the price because you have to become VAT registered at a later date. Fees for accountancy
Your new company is most likely going to be short of cash and so becoming VAT registered is probably a bill that is not needed. You can perform your own VAT returns online. Although expert advice from an accountant is invaluable for new companies. Your account will know the rules of what you can and cannot claim back. Something you might not be sure on yourself.
Think about if you end up with a VAT inspection?
A good accountant is invaluable if a VAT inspection should occur. Proportions of bills charged VAT
How much are your outgoings and what are would you be saving from being VAT registered?
You did read it correctly, you are able to save money by being VAT registered! While writing this VAT is 17.5% on top of the pricing of the service or product being charged VAT. Should you not be VAT registered, unfortunately you are unable to claim this back. However, as a VAT registered company, you are able to claim this back against whatever VAT you owe when you do a VAT return.Talk to an accountant What I have written above are just a few points to think about when registering your new company. While my advice should be in mind, you should always seek advice from a good accountant while setting up a company.
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For help with company formations, try Optimum Formations, who specialise in UK company formations.
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