Updated on May 14, 2022
The 4 Big Benefits of Being Vat Registered
For small firms, voluntary VAT registration offers four major advantages. Only businesses with a yearly revenue of £83,000 or more in the United Kingdom are currently required to register for VAT.
VAT (Value Added Tax) is imposed on all products and services purchased in the United Kingdom. Current VAT rates are 20%, 5%, and 0% for the reduced and zero rates respectively.
Most products and services will be taxed at the regular rate of VAT. Car seats for youngsters and energy providers are among the firms that would benefit from the reduced tariff. Food and children’s clothing will be exempt from tax.
As a small business, how can you reap the benefits of VAT?
1. You get a VAT registration number
This may not seem like a big deal, but displaying your VAT registration number on all of your documents, websites, and stationery can have a positive impact on your firm. Your company’s credibility will rise as a result, as will your reputation as a reliable and trustworthy organisation.
2. You can claim VAT refunds
All items and services purchased by your business can be reclaimed for VAT once you have registered your company. The amount of VAT your company charges and receives each year must be taken into consideration. As long as you have made significant investments in plant and machinery, you may be eligible to claim back VAT.
When it comes time to file your VAT return, you might be surprised to learn that the HMRC actually sends you money!
3. You can reclaim VAT from the past
If you register for VAT, you may be able to collect VAT on purchases you’ve made in the last four years and are still using. Your company would need to be active and in operation for this length of time in order to be eligible for this benefit.
4. You can improve your business image
Another advantage of becoming VAT-registered for a new small business is that the VAT threshold is widely known. By displaying your VAT number, you give the impression that your business is larger than it actually is.
When interacting with other businesses, this may be useful to you. A legitimate VAT invoice is preferred by some businesses.
The Bottom Line
As a small business, you may be interested in these four major advantages of VAT registration. You must, however, keep meticulous records and file timely VAT reports. If you need help with VAT, a variety of software programmes are available, or you may speak with your accountant.