Approaching the VAT registration threshold

Posted on 25th November 2024 by Streets Value Added Tax


Image to represent Approaching the VAT registration threshold

When approaching the VAT registration threshold there are important matters to consider. The VAT registration threshold is the point at which businesses must register for VAT with HMRC.

A business must register for VAT if:

  • their total VAT taxable turnover for the previous 12 months is more than £90,000 - known as the ‘VAT threshold’;
  • they expect their turnover to go over the £90,000 VAT threshold in the next 30 days; or
  • they are an overseas business not based in the UK and supply goods or services to the UK (or expect to in the next 30 days) – regardless of VAT taxable turnover.

With traditional VAT registration, businesses are required to collect VAT on their sales and pay it to HMRC even if customers have not paid their invoices. This can create cash flow issues, as the business must remit the VAT before receiving full payment from customers. This means that small businesses may struggle with cash flow due to VAT liabilities, especially if they do not have enough working capital to cover tax obligations while waiting for customer payments.

We would be happy to help businesses approaching the VAT registration threshold understand their options. There are a number of VAT registration options available. Making the wrong choice could have significant cash flow consequences. It may be possible to alleviate these difficulties by adopting the VAT Cash Accounting Scheme or VAT Flat Rate Scheme but take advice before making a decision as registration criteria apply; not all businesses would qualify.


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


Expert insight and news straight
to your inbox

Related Articles


VAT Flat Rate Scheme overview

The VAT Flat Rate Scheme allows businesses to pay VAT as a fixed percentage of their total turnover, which includes VAT. The applicable percentage varies based on the business type. This scheme is designed to simplify VAT accounting, thereby reducing


VAT recovery from car leasing payments

The VAT treatment of motor expenses is an important concern for any business that incurs VAT on these costs. Below, we highlight key points to consider regarding the recovery of input tax (VAT) when leasing vehicles. We have covered below some


Construction industry - VAT reverse charge

There are special VAT reverse charge rules in place for certain building contractors and sub-contractors. These regulations, which came into effect on 1 March 2021, make the supply of most construction services between construction or building

You might also be interested in...