A small business guide to VAT registration

If your business is growing successfully and it passes the £81,000 annual turnover mark, you are legally obliged to become VAT registered with HMRC. Here are the basic steps you need to undertake.

1. Choose the right VAT scheme

If your annual turnover is less than £150,000, you may find it more profitable to register for the VAT Flat Rate Scheme. You should speak to your VAT accountant before registering with HMRC.

2. Complete the paperwork

VAT registration is actually an application process – you need to complete the relevant forms and HMRC should approve your application. You can print out the relevant paperwork, or apply online depending on your preferences. Again, your accountant can help you with this.

3. Keep accurate VAT records

You will need to keep track of your company’s VAT transactions in the same way that you record all other financial movements. Ensure that your accounts system allows you to quickly and easily record all VAT invoices and expenses – we include access to online accounting platforms Xero within the fees we charge to our clients.

4. Prepare for your returns

You need to file a return for each VAT period – usually once every three months. To help reduce your admin burden, you need to ensure your records are kept as up-to-date as possible. Again, much of this will be handled by a competent accounts system.

5. Choose your accountant carefully

To ensure you pay the correct amount of VAT each period, choose an accountant who specialises in small business accounts. They will then be able to help you better manage your liabilities and improve profits.