HMRC have launched a new online tool to help businesses estimate the affects of registering for VAT.
The VAT registration tool is open to all small businesses and self employed individuals who are looking to find out more about VAT.
A business is expected to register for VAT if they reach a total taxable turnover of £90,000 (VAT threshold) but you can register for VAT voluntarily as well.
The new HMRC VAT registration tool let’s you evaluate different outcomes based on your own set of circumstances.
You can use it for free as many times as you wish to estimate how much VAT your business could owe and claim back as a VAT refund.
Being able to enter different scenarios is a useful feature so you can see how being VAT registered could impact your businesses profit and processes.
HMRC notes that the tool only “estimates what registering for VAT may mean for your business” and any results are not to be used to complete a VAT return.
The VAT tool can be found on .GOV here https://www.gov.uk/guidance/check-what-registering-for-vat-may-mean-for-your-business.
VAT stands as one of the fundamental and common types of business tax that owners should understand so they’re compliant with HMRC regulations and operating with optimal tax efficiency.
What do I need to use the VAT registration tool?
Before you begin using the tool it’s best to gather together as much of the VAT related information below as you can.
You’ll need key details about your UK business finances. This includes:
- Your business income.
- Costs for goods and supplies.
- Other general business expenses.
You should be able to get most of what you need from your current and previous accounting records.
It’s also important to know:
- The rates of value added tax that apply to your business income and expenses. The standard rate of VAT is 20% but there is a reduced rate and zero rate for some good and services.
- Whether any of your income is exempt from VAT. Our guide to what is VAT exempt can be located here.
VAT record keeping
Registering for VAT means you need to adhere to the record keeping requirements of making tax digital for VAT.
The vast majority of businesses need to follow making tax digital regulations meaning that HMRC expects you to keep your VAT records electronically.
Your records must be stored using compatible VAT software that connects to HMRC systems and be kept for at least six years.
