In 2010/11 the threshold for compulsory VAT registration is a turnover of £70,000. If your sales are already over that figure, then (subject to a few minor exceptions) you have to register.
Likewise, if you hit the threshold in the course of the year you have (on average) a two month grace period in which to sort out the VAT registration.
Even if you are not yet at the threshold, you can still register voluntarily. The benefit in doing that is threefold:
- You can reclaim VAT on relevant purchases.
- Your invoices will look more mainstream (anytime I get an invoice without VAT I know that I'm dealing with a very small business).
- You get into a proper routine of accounting for VAT quarterly and you adopt the right discipline.
The main disadvantage is for businesses which primarily sell to private individuals. If your customers are not VAT registered, then they cannot reclaim VAT, and suddenly you look much more expensive. The other big issue is international trading. There are special rules about EU customers (those outside the UK) and you must have their billing address and their VAT number (with the country code prefix).
So what do I think? Register now! If you're serious about running a business, then you need to adopt the right systems at the outset and you need an annual sales target of more than £70,000 . . . don't you?
http://bit.ly/biZ6v4
