What is VAT Threshold? - Accountants in Croydon

 The VAT threshold is the amount of yearly turnover necessary for firms to register for value-added tax (VAT). Registering for VAT is a legal necessity for enterprises that surpass this level, and HMRC reviews it on a regular basis. The threshold increased steadily between 2014 and 2017, but has stayed constant since then.

You must register for VAT if your company earned more than the VAT threshold in any 12-month period or if your VAT taxable turnover is expected to exceed the VAT registration level within the following 30 days. The 12-month period in question does not have to correspond with the fiscal year. You should examine whether your VAT taxable revenue for any given 12-month period has above the current VAT registration threshold on a regular basis. In this guide we will learn about the VAT threshold.

Even if your revenue does not reach the VAT level, you may opt to become VAT-registered on a voluntary basis. You may opt to do so since it provides a variety of advantages, including:

  • The possibility to get VAT charges back
  • The possibility to get VAT back for things that have been in use for the last four years.
  • Simply possessing a VAT registration number might convey the company's size and status.

What is the current registration threshold for VAT?

The current VAT registration barrier in the United Kingdom is £85,000. The administration has announced that this criterion, which has been in effect since 2017, would stay in force until 2024.

Previous year's VAT thresholds are as follows:

  • 2014–2015 – £81,000
  • 2015–2016 – £82,000
  • 2016–2017 – £83,000

When your company's annual revenue hits the VAT threshold, you have 30 days to register for VAT with HMRC. When this procedure is completed, your company will have a new set of duties, which include:

  • Including VAT in the price of your goods or services
  • VAT on products or services provided by your vendors
  • Annually submitting your VAT return to HMRC
  • Keeping a VAT account and records

Taking into account the VAT threshold

Whether you utilise cash or accrual accounting, include VAT accounting in your bookkeeping activities. There are various accounting techniques available to aid organisations with this. Depending on your yearly revenue, several schemes may be relevant.

These are the following:

  • Flat rate VAT scheme threshold - If your annual turnover is less than £150,000, you may join this programme to pay HMRC VAT at a flat rate to improve cash flow.
  • VAT Cash Accounting Scheme threshold - This works in the same way as ordinary cash accounting in that VAT is paid and recorded when goods or services are purchased rather than when an invoice is received. If your yearly revenue is less than £1.35 million, you are eligible to participate in this initiative.
  • Scheme for Annual Accounting VAT threshold - In this case, you file one VAT return per year and make advance payments against your VAT liability. Companies having a VAT taxable turnover of £1.35 million or less are eligible for this plan.

Frequently Asked Questions regarding the VAT Exemption Level

Can I cancel my VAT registration?

Yes, you can deregister for VAT if your annual turnover falls below the £85,00 deregistration level. Furthermore, if you join a VAT group or cease trade, you must deregister, even if your turnover exceeds the VAT deregistration level.

What if I momentarily go above the VAT threshold?

Your yearly turnover may momentarily surpass the VAT threshold but rapidly fall significantly below it. In this case, you may request a 'exception' to registration. To do so, you must demonstrate to HMRC that your taxable sales income will remain below the VAT deregistration level for the following 12 months.

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