The hidden benefits of being vat registered
Value Added Tax (VAT) is the sales tax levied against goods and services within the UK. If your business’s turnover is in excess of the VAT Registration Threshold, which is currently £85 000 per annum, you are required by law to complete a VAT Registration with HM Revenue & Customs. However, if your turnover is below this threshold, you can still voluntarily register your business for VAT, and we’re going to tell you why this is a good idea.
It makes your company look good
When you register for VAT, you receive a VAT number. Whilst this may not seem like a big deal, displaying your VAT number on all your documents, your website and on your stationary can add credibility to yor business and give you a more trustworthy, successful and professional image.
If you are running a small business and are looking for clever ways to develop a steady client base, presenting your company as being bigger than it actually is by being registered for VAT is a powerful tactic. By registering for VAT, you are sending a strong message out to potential customers that your business is going places. This can give you an edge over other small companies who aren’t VAT registered.
Most people are aware of the abovementioned VAT threshold. By having and displaying a VAT number, clients, lenders, investors, and suppliers will assume that your company’s turnover is more than £85 000.
It helps facilitate business to business relationships
A huge advantage that comes with being VAT registered is that you can deal with external businesses more easily and efficiently.
There are many businesses out there that simply will not work with your company if you are not VAT registered. If you are a small, growing business, it would be a shame to lose out on potential clients simply because you aren’t voluntarily VAT registered.
You will probably find that, without the ability to produce a proper VAT invoice, many organisations may be unwilling to deal with you. And if you are ever planning to work with international companies, you might find them reluctant to trade with you if you are not VAT registered.
So, again, being VAT registered is a strategic move towards the growth of your business and truly works in your favour.
You can claim VAT refunds
There’s nothing better than HMRC giving your money back through a VAT return. As a small business, this injection of funds has endless benefits.
By being VAT registered, you can reclaim VAT on all goods and services your business purchases, at the end of the year. This must, of course, be balanced with what your business is charging and receiving in VAT payments over the year and you must keep proper VAT records and invoices.
Want to know the best part? You can reclaim VAT you incurred before you became VAT registered and this could be for items you use for your business bought before you started your business, for example, a computer. You may be eligible to claim VAT for the past four years for items that you are still using. This would require you being in business for this length of time and that you have kept VAT invoices and records for the period.
We know that being VAT registered has a lot of bad press. It can be an administrative hassle as it requires paperwork, maintaining VAT accounting records and filing VAT every quarter. However, registering for VAT could also do wonders for your small business, particularly if you are looking for new and strategic ways to grow.