Advantages and Disadvantages of Being VAT Registered

benefits of being VAT registered

Are you planning to establish a new business start-up in the UK? There are a certain number of legalities that you will have to prepare for in this process. One of these mandatory legalities is getting your business registered for VAT. This is imperative to mention here that you become legally liable to get your business registered for VAT once your turnover crosses the certain limit of £85,000 in the previous years. Even if you are expecting to cross the turnover limit within the upcoming month, you should take immediate measures to register your business for VAT. Also, there are several benefits of being VAT registered in the UK.

Moreover, in the case of small businesses that are not even close to crossing the taxable turnover limit of figure £85,000, it is advised to go for voluntary VAT registration of your business. This will bring in a lot of benefits for you. In this guide, we have outlined all the possible pros and cons of getting your business registered for VAT. However, it is important to have a basic understanding of what is VAT actually, before we delve further into the discussion.


Accounting firms can assist you in managing the number of benefits of being VAT registered with the maximum relief possible. Let’s talk to one of our professionals or tax advisor.


What is VAT

VAT is the abbreviation of value-added tax. This s a kind of tax that refers to the consumption tax on goods in the process of the supply chain. In the UK when businesses registered for VAT, the VAT is charged on almost all products and services. Moreover, the products and services that are being imported from the EU countries or even non-EU countries, VAT is applicable for these products as well.

Moreover, VAT is added to the sale prices of these products when they are up for sale to commercial businesses and non-commercial businesses. The business that is registered for VAT is allowed to reclaim the amount of VAT that they have paid in the process of buying these goods and services.


How to Get your Business VAT Registered in the UK?

The process of getting VAT registered in the UK is pretty simple. The first that you are required to do is to sign up for the HMRC online service. It is a smooth and straightforward procedure. It will take a period of two weeks in order to process the application for VAT registration.

Moreover, you are not allowed to charge VAT on your selling of goods and services unless you receive the number from HMRC. What you can do in this waiting time is to have a reflection on what the amount will be of VAT charges and how will you adjust the process. Moreover, your VAT returns will take a normal period of three months before they are received by you. You will do the VAT payments to HMRC through an electronic medium as well.


What are the Pros of Being VAT Registered in the UK?

The legal threshold for getting your business registered for VAT is £85,000. Some people might think that getting to know the advantages or the disadvantages is irrelevant because it becomes a legal responsibility that you will have to follow anyway. However, for small businesses that often opt for voluntary registration of VAT, there are a number of multiple benefits. These are also for the companies that are required to do the process of VAT registration. Prominent benefits are outlined below:

  • There are many businesses that do not prefer to work with businesses that are not registered for VAT. So your business relationships will be boosted if you opt for being VAT registered.
  • You will not develop an image of a business being too small in the industry.
  • You can use the VAT number on your company letterhead to showcase that VAT registration.
  • You can apply VAT on all the services and products that you are selling.
  • You are in a good position to reclaim the VAT that you have paid while purchasing products and services from other companies.
  • It will help you with marketing as your image in the business industry will grow up.


What are the Cons of Being VAT Registered in the UK?

In case you are a small business and your business turnover is not crossing the limit of figure £85,000, you will not worry about any of the disadvantages that come with being a VAT-registered business in the UK. However, a comparison of the pros and cons will help you to make the right business choice for your company. Some prominent cons of getting your business VAT registered in the UK are outlined:

  1. The VAT-registered business will have to maintain admin duties that are stringent.
  2. You are most likely to get hefty bills from HMRC.
  3. For the customers who are not VAT registered, your price with VAT will seem overpriced to them.


The Bottom Line

Now that we have gathered a fair amount of information about the benefits of being VAT registered in the UK, we can bring the discussion towards wrapping up. Being VAT registered brings in a lot of advantages as well as a few disadvantages. You will have to weigh both sides before you plan to go for registration if you are a small business. We hope these few minutes of reading will help you to develop a better understanding of the benefits of being VAT registered in the UK.


We are committed to delivering exceptional accounting services to our valuable clients in the UK to ensure they get the most professional solution to know the number of benefits of being VAT registered and paying taxes in the UK.


Disclaimer: All the information provided in this article on the number of benefits of being VAT registered in the UK, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.