Some business owners will always feel more comfortable appointing an agent to register for VAT (as well as then submitting VAT returns and dealing with HMRC on their behalf). But there’s no requirement to appoint an agent and many business owners will choose to register themselves. In this article we look at the process of registering for VAT.
For most businesses, the process to register for VAT is a quick and simple one which can be completed online, directly with HMRC. The online service is usually available to sole traders, partnerships, companies limited by shares, companies limited by guarantee, limited liability partnerships, unincorporated bodies and trusts. A group of companies registering under a single VAT number can also do so online.
If you haven’t done so already, to register for VAT online you’ll first need to create an online account with HMRC (also called a ‘Government Gateway account’). In the future, it’s from this account that you’ll submit regular VAT returns to HMRC.
After logging into the account, select “Register for HMRC taxes” which will initiate a simple process. To complete this, you’ll need various information, which for a company would include:
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- The registration number of the company and its unique taxpayer reference
- The company’s registered office address
- Director details
- Details, including VAT numbers, of all recently associated businesses (typically the last 2 years). That includes, for example, where someone has been a director of another business in that time.
- Type of business activity being undertaken
- Predicted turnover in the next 12 months
- If a business is being acquired, its details
- Business bank account details
- The effective date of VAT registration (see below for details)
When is the 'effective date'?
The ‘effective date’, provided as part of the application, is the date from which you will be registered for VAT and need to start charging VAT on all relevant sales.
If you had to register for VAT because your turnover has exceeded the registration threshold, the effective date is the date you were obliged to register. If you’re registering for VAT voluntarily, you have some flexibility on what to set as the effective you. In doing so, you might want to consider:
- Whether it’s possible and useful to align the registration date with other company dates, for example the start of the company’s financial year
- Setting a date that won’t cause issues when invoicing clients, particularly for any work that was partly but not fully completed at that date
- If there are good reasons to backdate the registration
When you submit the online form, you’ll get an acknowledgement number that you can use if you have any queries or need to query progress with HMRC.
Registering for VAT on paper form VAT1
In some cases, a business will be unable to register for VAT online. The circumstances when online registration is unavailable include where:
- You want to apply to be excepted from VAT registration
- You need to register where the business was liable to register for a period of time but is no longer liable to register
- You’re registering the divisions or business units of an organisation or individual companies within a group of companies under separate VAT numbers
- You’re an EU business ‘distance selling’ to the UK
- You ‘acquire’ (essentially, import) goods from another EU country
- You’re looking to join the Agricultural Flat Rate Scheme
- You need to dispose of assets on which 8th or 13th Directive refunds have been claimed
If any of these circumstances apply, or you’d prefer not to register online, you can register for VAT using form VAT1. Much the same information will be required as for the online application and some notes are available to help you complete the form. Once complete, in most cases it should be sent to HMRC at:
Wolverhampton Registration Unit
Even if you register on paper for VAT, you’ll still need to complete VAT returns online. If you’ve applied on paper, you’ll be able to sign up for an online VAT account once you receive your VAT number.
Receiving your VAT certificate
If you’ve registered online, you’ll receive an email once the VAT number has been issued. The VAT registration certificate will also be provided:
- Within your VAT online account, if you’ve registered online
- By post, if the registration has been completed by an agent or you registered by post
The VAT certificate includes the following details:
- Your VAT number
- The ‘effective date’ of VAT registration
- Details of when you need to submit your first VAT return and payment
You should keep the VAT certificate safe with your other business records. As it provides evidence of VAT registration, it’s possible you may be asked to produce it later.
How long will it take to receive a VAT certificate?
Whether you register for VAT online or on paper, HMRC aims to process 70% of applications within 10 working days of receipt. While the vast majority are usually processed within a month, there have been busy periods where a backlog of applications build up and they have taken much longer to be processed, even upwards of 6 months. It will also generally take longer to receive the VAT certificate if HMRC need further information or want to carry out additional checks.
What do you do while waiting for the VAT certificate?
Between the ‘effective date’ of VAT registration and when you receive your VAT registration number, you must still account for and pay any VAT due to HMRC. So you must start accounting for VAT on sales of relevant goods and services from the effective date of VAT registration, not from the date you physically apply for registration (unless it’s the same date) or the day you actually receive your VAT certificate.
However, while you’re waiting for HMRC to confirm your VAT number, you can’t explicitly charge VAT or show it on any invoices as a separate line. Instead, HMRC advises that businesses should increase the amount they charge by the prevailing VAT rate of 20%. So, for example, if you’d previously have charged a customer £1,000, you’ll need to increase the price you charge by 20% to £1,200, without explicitly showing the extra £200 as VAT on your invoice.
When you explain the situation to clients and customers, you should let them know that you’ll reissue invoices with the extra amount separately identified as VAT once you receive your VAT number. The reissued invoices, amended to show your VAT registration number and the VAT charged, will make sure that VAT-registered customers can reclaim the VAT that they have paid.
You’ll also be able to reclaim any VAT you pay on your purchases from the ‘effective date’, so you’ll also need to start keeping records of invoices where your suppliers have charged you VAT.