If the turnover of a business exceeds the VAT exemption limit, the business must register for VAT and charge VAT on its sales. It is then
able to claim VAT inputs on amounts it has paid to suppliers and other businesses that have charged VAT on their bills to your business.
For most businesses, you then have to complete a VAT return each quarter, and pay over to Customs and Excise the VAT you have collected by
charging VAT on your sales, less the VAT you have paid on your business expenses.
You must register for VAT with Customs and Excise if your turnover for the past 12 months exceeds the annual registration limit. You must
also register if you expect your turnover in the next 30 days to exceed the annual limit. If you intend to purchase a business as a going
concern, you may need to register. The VAT rules for the purchase of a business as a going concern are complex. It is worth taking advice
in these circumstances.
You purchase a business as a 'going concern' when you buy someone else's VAT registered business and are not charged VAT on the purchase of
the business.
The VAT registration limit changes. The limit is about £58,000 (as at June 05)
Failure to register when you should can have devastating consequences, as Customs & Excise can backdate your registration and make you pay
7/47 of turnover that you have already charged to your customers.
Any business must keep good records, and it is particularly necessary for VAT, where quarterly or annual returns have to be made to Customs
& Excise. It is important never to try and cheat the VAT man, whose powers in some areas exceed those of the police.
If you are likely to operate VAT it is important to obtain the correct professional advice before your business commences.
