Anyone can register for VAT voluntarily but registration is compulsory if your sales turnover goes over the VAT threshold, currently £85,000 for 2018/19.
The VAT threshold is based on turnover, not profit. It can be surprisingly easy to hit the threshold if you work in industries which require large amounts of purchases such as hospitality or construction.
Turnover is based on gross sales. This can be important if you make online sales where commission or fees are taken off before you receive the money. Your turnover is based on the sales before any deduction, not the money that you actually receive.
Turnover is judged on a rolling 12 month basis not your last set of accounts. This means you might have to register for VAT in the middle of your financial year if your sales are gradually increasing. It’s not about making a once per year judgement. It’s something that needs to be considered each month.
You are supposed to register for VAT within a month of going over the threshold or if you know your sales for a single month will be over the threshold.
It doesn’t matter what your profit is; even if the business is making a loss overall, once you hit the threshold you still have to register.
The threshold is not fixed. It’s one of the things that the government can choose to vary, so listen out at budget time for any updates. It usually goes up slightly each year.
The threshold is not fixed. It’s one of the things that the government can choose to vary, so listen out at budget time for any updates. It usually goes up slightly each year.