The UK tax body has launched a digital tool to help small firms find out what registering for VAT could mean for their business before signing up.
HMRC has launched the VAT Registration Estimator, a digital tool for small businesses to help them decide if VAT registration is right for them.
The VAT Registration Estimator has been developed in partnership with small businesses and trade representatives, who tested the online tool and gave feedback before its launch. It can help any business to see what registering for VAT could mean, as well as linking to further information about the registration process. It is also a useful tool for businesses operating below the threshold that are considering voluntary registration.
"I volunteered to be a tester for the new VAT tool. I am not a VAT expert, so approached the experience as if I were a business with no knowledge of VAT. Having made some comments, along with other stakeholders, I have now used the final tool and find it very useful. I like that when you are asked for information there are examples, links to guidance where appropriate and help on completing the boxes. A lot of work has gone into this tool, and I believe stakeholder views have been considered, to ensure the customer has the best experience possible." Karen Thomson, Administrative Burdens Advisory Board (ABAB) member.
A business must register for VAT if:
- Their total VAT taxable turnover for the previous 12 months is more than £90,000 (the current VAT threshold).
- They expect their turnover to go over the £90,000 VAT threshold in the next 30 days.
- They are an overseas business not based in the UK and supply goods or services to the UK (or expect to in the next 30 days), regardless of VAT taxable turnover.
A VAT-registered business must charge VAT on eligible sales and can usually reclaim it on eligible purchases. There are around 300,000 new VAT registrations each year.
"We know that the majority of our customers want to get their tax right. We have listened to what businesses have said and the new tool is designed to help them understand VAT registration, including when they might be required to register." Jonathan Athow, HMRC director general for customer strategy and tax design.
Businesses can use the estimator whenever they like, it is free to use and it should take around 20 minutes to complete on first use. You can use the VAT Registration Estimator if you are setting up a new business and you can also experiment with different inputs and outputs. HMRC will not record the details that you input.
You can find out more about VAT registration on the government website. HMRC will host a live webinar on 24 July 2024 to explain how to use the tool. It will also be available to view on demand.
How to use the VAT Registration Estimator
- Input whether the business is, or will be, based in the UK.
- Input your approximate business income and business costs for the time period you wish to estimate, up to 12 months.
- Use the guidance links provided to choose the VAT rate(s) for your business income and costs - as an estimated percentage of zero, reduced or standard rated, or VAT exempt, goods and services.
- Then input if you would prefer to add VAT to, or absorb VAT into, your current or estimated selling price.
- The results can be saved and printed.
Written by Rachel Miller.
