Understanding VAT for your business

Thinking of registering for VAT for your business? We at MTD are Making Tax Digital HMRC recognised and are here to help you understand the full picture behind reclaiming the VAT from your purchases and the compliances involved.

VAT Eligibility

Unless you only sell VAT-exempt goods and services, you can voluntarily register for VAT or if your annual turnover exceeds the threshold then you must register for VAT.

• If your annual turnover is greater than £85,000 then you must register for VAT.
  You may be fined if you do not register – click to see penalty on gov.uk page
• If your annual turnover is less than £85,000 you can voluntarily register for VAT which will allow you to reclaim the VAT portion of your business expenses when you submit your VAT returns.

Reclaiming VAT

You are able to reclaim on your business expenses made before you registered for VAT depending on certain conditions being met.

Goods purchased up to 4 years prior to registering:

• The goods were sold to the company registering for VAT
• These goods must still be held by the company
• The goods are for your VAT taxable business purpose
• You cannot reclaim VAT on goods that you have already sold or supplied before being VAT registered

Services purchased up to 6 months prior to registering

• The services were sold to the company registering for VAT
• The services are for your VAT taxable business purpose
• You cannot reclaim VAT on services which relate to goods you disposed of before you were VAT registered

In order to reclaim on your pre-registration VAT you must also hold valid VAT receipts or invoices for each item you are claiming for.

Next Steps

If you require any assistance registering for VAT, calculating your pre-registration VAT reclaim or submitting your VAT return directly to HMRC through their MTD initiative – get in touch with us at MTD.