Businesses usually have to register for VAT if any of the following apply:
- The taxable turnover of their business in the previous 12 months reaches the VAT registration limit (currently £81,000). Businesses can also register on a voluntary basis if their turnover is below this.
- They believe their turnover in the next thirty days will exceed the registration limit.
- The business takes over another business as a going concern whose turnover meets the conditions in the previous 2 points.
- The business buys goods from elsewhere in the EU to a value above the registration limit in one calendar year.
There are penalties for failing to register on time.
Goods and services liable to VAT are known as 'taxable supplies'. Once registered a business must charge VAT on all taxable supplies.
Supplies which are specifically not subject to VAT are referred to as VAT exempt supplies. This includes insurance, financial services, postal services, health and education, although there are exceptions in every category.
An application to register for VAT is made using a VAT1 form. The application form and accompanying notes have recently been updated.