Benefit of going vat registered?

Question

i earn below the threshold before having to register vat but was wondering if i should volunteer, i could claim back quite a bit & businesses would benefit from a vat invoice! i'm sure its not that easy so what would be the draw backs, i'm a self employed tradesman

regards

Answer 1

You are able to register for VAT even if your turnover is below the threshold, which at the moment is about £67,000.

The benefits are being able to claim the VAT back on your business expenses that have had VAT charged.

If your customers are VAT registered they can reclaim the VAT you charge to them, so you will be no more expensive. BUT if your customers are not VAT registered they won't be able to reclaim the VAT. If this is the case you have added 17.5% to your sales price and this will make you more expensive compared to tradesmen who are not registered.

If you sell to businesses the odds are they will be VAT registered and if so you will save money by registering.

When registered you will have to prepare quarterly VAT returns to pay over the VAT you have charged to customers and be refunded for the VAT you have had to pay on your supplies and expenses. As you are a small business there are various schemes to make this easier, one of these is the flat rate scheme which simplifies the process but may mean you don't reclaim as much VAT if you did it the proper way, it depends on your situation.

Answer 2

As far as i can remember you actually have to be earning at or over the vat threshold to get registered.