Is your business VAT-exempt?
Most businesses need to register for VAT once their annual turnover rises above £81,000. However there are some exceptions to this rule.
You sell only VAT-exempt goods and services
Businesses dealing solely in VAT-exempt goods and services cannot register for VAT. These include:
- Education and training providers
- Insurance, finance and credit providers
- Businesses that sell, lease or let commercial land and buildings
- Fund raising events organised by registered charities
If your business operates in one of these sectors, there is no need to register for VAT with HMRC.
You’re not technically ‘in business’
According to HMRC, you are in business when:
- You are getting paid for providing goods or services
- Those goods or services are paid for in cash or using an in-kind agreement
Whether trading as an individual, or a registered company of some sort, if you are accepting payments, you are in business. Consequently, if you are not receiving payments of any kind, you are not in business and need not register for VAT.
There are also some slight variations in requirements when it comes to distance selling to other countries in the EU. If this is the case, you should speak to your tax accountant before settling your VAT registration status.
Should you register for VAT anyway?
Unless your business is VAT-exempt, there are possible benefits in registering for VAT, even if you do not meet the income threshold. If you are in any doubt, or need to clarify whether your business really is VAT-exempt, you should get in touch with a suitably experienced accountant.
