A business is required to register for VAT if they match one of the compulsory registration criteria. However it is also possible to register with turnover less than £85,000, this is called voluntary registration, and there are several business benefits of doing it:
Avoiding Financial Penalties – The obvious advantage of voluntary VAT registration is you won’t have to worry about passing the threshold and not notifying HMRC in time, which could result a nasty fine. You can voluntarily register for VAT whenever you want to.
Boosting Your Business Profile – starting out as a small business or new limited company it can be tough to compete against the big boys. Most people are aware of the VAT registration threshold, so voluntarily registering your business for VAT might give the impression that your business is bigger and more successful than it actually is.
Easing Business Dealings – many suppliers and organisations are unwilling to do business with companies and SMEs that aren’t VAT registered. You might find that without the ability to produce a proper VAT invoice many of these people will be unwilling to deal with you. The advantage of voluntary VAT registration is you will be issued with a VAT registration number and can more easily deal with external businesses.
VAT Refunds – another advantage of voluntary VAT registration is the ability to claim VAT on goods and services purchased for your business. If you are selling one sort of VAT rated product (e.g. zero rated) while buying another (e.g. standard rated) you may actually receive money back from the HMRC.
Reclaiming The Past – voluntary VAT registration allows you to reclaim VAT you incurred before registration, provided the goods or services are now wholly used in the business, even if your turnover is lower than 85,000.
