Crossing over the vat threshold limit takes you into the world of vat

If you are a trader in a eu country that follows the system of VAT or value added tax then crossing over the vat threshold limit will take you into the world of vat. If your business is located in the UK then once your taxable sales touch £70,000, which is the threshold limit or if you expect to touch that limit in the coming 30 days, then you will need to apply for vat registration immediately.

The threshold limit is the minimum amount of taxable sales that qualifies you to register for vat. Your business might also cross over this threshold limit in case you take over an existing business and the combined taxable sales of your existing and new business go over £70,000. However, Her Majesty’s Revenue and Customs or hmrc that looks after all aspects of vat tax in the UK also allows you an option of turning into a vat registered trader even if you have just started a new business and have not touched the threshold limit. This could be helpful for your new business in case you do not sell goods or services to end-customers but instead to other traders or companies that need to continue the chain of vat and reclaim vat paid to you.

Several other eu countries too have followed the system of vat in a bid to block tax leaks and increase revenues. The European Commission that oversees vat all over Europe has issued eu vat rules that form the basis of vat in each eu country that levies vat on goods and services purchased and sold in that country. Each country also has its own vat threshold limit that allows businesses to enter into the vat system. Once a business gets vat registration from the appropriate vat department of that country then the business also gets its own vat number along with the country code that needs to be displayed on each vat invoice, vat return and vat refund application.

It is quite easy to turn into a vat registered trader in the UK since hmrc offers online vat registration forms that can be downloaded and even submitted online if you are the sole owner of your business. You could be asked to submit additional details and might receive your vat registration and vat certificate within 30 days of submitting your application. Once you turn into a vat registered trader then you will also need to follow all other uk vat rules like filing regular vat returns and following proper procedure. You can also file for vat reclaim if you have already paid vat on goods and services in another country. However, if you only deal in vat exempt goods or services then you need not turn into a vat registered trader or in case you can satisfy hmrc that your business is not used for vat purposes. A competent vat agent would be able to guide you on whether you need to apply for vat while also guiding you in case you do need to register for vat.

If you are a trader in the UK that needs to become a part of the vat chain then you can do so whenever you desire. However, if you do manage to cross over the vat threshold limit of £70,000 in taxable sales then it is mandatory for you to register for vat and turn into a vat registered trader.

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