How Voluntarily Registering for VAT Can Help Your Business

You might already know that you are legally required to register for VAT once your business turnover exceeds £85,000 but did you know that you can do it voluntarily before you even get close to that threshold? Having to deal with extra rules and regulations sounds like it would be more trouble than it’s worth but VAT registration can actually deliver a number of advantages:

  1. Increase your customer and client base

VAT registration is like gaining a badge that you can display to the world to show that you are a well established business. Your VAT number can go on your email signature or letterhead as well as all your invoices and your website. Given the legal requirement to register for VAT above a certain threshold, it can also give the impression that you’re a bigger business. Furthermore, if your clients are VAT registered then they can claim back the VAT on their purchases from you, offering an additional incentive to do business with you.

  1. Claim it back

For every item or service you purchase that includes VAT, you can reclaim this tax back from HMRC. This is a direct boost into your business from purchases you were making anyway and effectively saves you money. For example, buying a new computer for a price of £1,000 including VAT of £200 will mean you can reclaim the £200 on your VAT return. If you charge VAT on your own services then this will reduce your VAT bill by £200. Voluntary registration can be backdated up to four years with sufficient evidence – meaning that you can still claim VAT back on all the equipment you bought over that period even though it happened in the past.

  1. Make the changes early

If you’re going to approach the £85,000 threshold at some stage in the future then it’s easier to have all the processes in place before you get there. Then you’ll have a seamless transition just as your business is growing and flourishing, leaving you one less thing to worry about.

  1. Avoid Fines

Failing to make a VAT payment or paying it late can lead to a fine so it is worth getting the whole process set up before you get to the point where VAT registration is a requirement.

  1. Be stress free!

Voluntarily registering for VAT gives you the time and space to ensure all processes are set up well in advance of when it becomes a legal requirement. Clients will already be used to seeing VAT on all of your invoices. There will be no extra accounting and administration headaches to consider once you approach the £85,000 threshold.

There are also some disadvantages:

  • If your customers are not VAT registered then they might consider your prices to be less competitive with the VAT included;
  • If you generate more VAT from the products you sell than the VAT you pay on goods or services purchased, then you’ll have to make a payment to HMRC;
  • Extra paperwork! At least to start with. Your friendly accountant can help sort this out for you.

Overall, voluntarily registering for VAT is a great idea for so many businesses as it comes with significant benefits. If you feel you need more information before you sign up, feel free to drop us an email at and we can explain how it would work for you and your business.



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