VAT and small businesses: all you need to know
You could be more profitable as a business by registering for VAT
In our view, if you are selling to the public, you should avoid VAT registration until your sales exceed the level where this is required, currently annual sales above £82,000 (in a rolling 12 months). Registering early in this case would either increase your prices by 20% or lower your profits if you absorb the rise. In either case, you would be less profitable (except if you had very large costs where the VAT could be recovered – but this is unlikely).
If, however, your customers are other businesses, it is likely that they will already be VAT registered and therefore able to reclaim the VAT you charge on what you sell to them. This means your prices remain unaltered leaving you with the benefit of a lower purchase cost.
This is because you will be able to reclaim the VAT charged to you by many of your suppliers. The result is: lower costs to the business, meaning greater profits. The trade-off is that you will need to record your sales and purchases in a more detailed manner and prepare quarterly VAT returns to HM Revenue & Customs. If this additional administrative workload is a concern for you why not think about removing that burden by using a bookkeeper to assist with this. Our bookkeeping services include full quarterly VAT support and could free up more of your precious time to work either on your business or spend with your family.
We can help you decide whether registering for VAT is beneficial and, if so, we’ll walk you through the registration process and prepare your first VAT return in a way that means you can do this yourself in future.