Updated on July 19, 2022
The 4 Big Benefits of Being Vat Registered
Small enterprises can take advantage of four main advantages of VAT registration voluntarily. Currently, if a UK-based company’s annual revenue is greater than £83,000, it is required to register for VAT.
VAT (Value Added Tax) is imposed on all products and services purchased in the United Kingdom.
The ordinary VAT rate is 20%, the reduced VAT rate is 5%, and the zero VAT rate is 0% at present.
For the vast majority of products and services, VAT will be charged at the usual rate.
Car seats for youngsters and energy providers are among the firms that would benefit from the reduced tariff.
For food and children’s clothing, there will be no additional fees or taxes.
As a small business, how can you reap the benefits of VAT?
1. You get a VAT registration number
On the surface, it may not seem like a big deal, but prominently displaying your VAT registration number can have a big impact on your company’s bottom line. As a result, your company’s reputation will improve and you will portray a more trustworthy and professional image to your clients.
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. This must be weighed against the amount of VAT your business charges and receives each year. Equipment, plant, machinery, and IT purchases may qualify for a hefty VAT refund.
When it’s time to file your VAT return, you can get a nice surprise from HMRC: money!
3. You can reclaim VAT from the past
You may be able to get VAT back on purchases you’ve made in the last four years if you register for VAT. Having been in company for so long and maintaining VAT invoices and records is a must.
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 appear to your potential clients to be much larger than you really are.
When interacting with other businesses, this may be useful to you. A legitimate VAT invoice is preferred by some companies.
The Bottom Line
Small businesses may find these four large advantages to VAT registration appealing. You must, however, keep meticulous records and file timely VAT reports. To help with VAT, there are a variety of software options or your accountant can assist.