Should you register for VAT?
That’s one of the big decisions you’ve got to make when you set up your business.
If you have reservations about going with the ‘Yes’, I can totally understand that.
At the same time, however, I believe you’re missing out if you decide not to.
Missing out on fulfilling your business’s true potential.
Stunting its growth.
It’s your business and your call to make.
To make it, you need to understand the different pros and cons of being registered for VAT.
Now that is where I can help you, starting with the pros….
Why register for VAT — the pros
Despite what you might think, initially, being registered for VAT has its pluses. We tend to think of it as more money going into the taxman’s pockets, which we want to avoid (within the confines of the law, of course), but there are various pros to VAT registration.
Charging VAT makes your business appear more established
Registering for VAT says to others ‘I’m an established business. I’m successful.’
It suggests you’re big. It inspires confidence. If you’re charging VAT, you must be doing something right because you’re making enough to charge it in the first place, after all.
Of course — who wouldn’t want to work with a professional?
It’s possible to claim money back on some expenses
Being clued up on where you can get extra cash from, what you can claim, how you can cut your costs and run your business profitably is important.
Did you know you can claim back the VAT on some of the expenses for your business?
Pay out more in VAT than you charge and you could get the difference back in your pocket. You can claim back VAT as far back as four years if you have all the relevant evidence of these expenses.
Not only that, you could be due a VAT refund if you’re paying VAT on goods or services which the provider has registered differently for VAT to your own.
Charging VAT can make your business more appealing to some companies
There are some companies out there who won’t want to do business with you if you’re not registered for VAT. Harsh, I know, but it’s true. They have their reasons, of course.
Placing your VAT number on your website, your invoices, receipts and business correspondence can really appeal to larger businesses and organisations. They’ll likely be registered for VAT.
If they have a ‘no no-VAT policy’ when it comes to hiring or purchasing, you won’t fall foul of it.
Why you might not register for VAT — the cons
Just as registering for VAT has its pros, it has its cons. I’m all for charging for VAT, as you’ll know by now, but that’s me. Here are some of the cons to consider before you register:
Charging VAT can put potential customers off
Just as charging VAT makes your business more appealing to some customers, it can make it less so to others. If they’re a business themselves and don’t charge VAT, they won’t be able to claim back the VAT they pay for your services.
Adding VAT to your prices will make them seem higher, which could make your service or product seem overpriced and, as a result, less desirable to potential or existing customers.
A good pricing strategy could, potentially, overcome this barrier.
You’ll have to do extra admin
Unfortunately, extra tax means extra admin.
You’ll have to track your revenue and submit a VAT return every quarter.
But you know something? Isn’t that a small price to pay when you land clients who have lots of money to spend and want a reliable VAT-registered business to help them?
You could receive unexpectedly large VAT bills
Once you register for VAT, you want to be claiming the VAT on as many of your business expenses as you legitimately can.
If you end up charging more VAT on your own goods or services (output tax) than you pay on goods and services you hire or purchase for your business (input tax), you’ll have to pay the difference to HMRC.
That could throw a real spanner in the works if you get an unexpectedly large VAT bill.
My take on VAT
Should you register for VAT?
It’s your business and a call only you can make for it.
If you want my opinion, however, the answer is: absolutely, and you should register from the very outset.
This is about allowing your business to fulfil its potential.
Register for VAT from the start and you don’t have to worry so much about making price adjustments that leave nasty tastes in your (potential) customers’ mouths.
With that little concern addressed, you can then focus on building up the business the way you want it to be.
Removing that cap allows you to strive for unlimited growth.
This is what you’ve come to do.
It’s time to make it happen.
Want to reach your first £10K month and break through that VAT threshold?