VAT Advice for New Business Owners in the UK

If you are planning on opening a shop of any kind in the United Kingdom, it is very important that you do it right! If you don't put in a lot of time, planning, and resources, it is almost guaranteed that your shop will fail. A failing business is never a pleasant experience. You will not only lose your livelihood but your dream could go right down the drain. One way to help your business fail is to not properly handle the VAT.

If you're new to the shop owning world, then you might not know what the VAT even is. The VAT is an acronym for Value Added Tax and all shop owners with an annual turnover of £58,000 are required by law to register for it. If your shop is relatively small and does not have such a turnover, then you are not required to register for the VAT.

Whether you are lawfully required to register for the VAT or not, you still can register for it. If you do register for the VAT, one benefit is that you can claim VAT back on all business expenses allowed including but not limited to stationary, office equipment, petrol, and travel expenses. This can help you as a shop owner when you file taxes at the end of the year. However, if you do register for the VAT you must always pay on time. Late payments are not tolerated and there are high repercussions for paying late.

If you register your shop for the VAT, you must keep it in mind that you will become 17.5% more expensive for those you do business with that are not registered for the VAT. If you are not lawfully required to register, you may want to reconsider if this percentage may hurt your bottom line. If you are considering registering, it is a good idea to seek professional advice beforehand. Once you do register, be prepared for a lot of paperwork. You will need to maintain immaculate records throughout the year, including the proper filing of receipts.

While being registered for the VAT has both its advantages and disadvantages, if you are legally required to register, do it. There are strict penalties for not paying or paying late. Furthermore, there are penalties if you fail to notify the Inland Revenue when your shop actually does reach the turnover threshold required for VAT registration.

VAT advice is just one small aspect to opening and maintaining your own shop in the United Kingdom. This is something you must definitely consider very early on and be prepared to handle. The transition from employee to employer can be achieved in a matter of weeks or months, but it does take a lot of work - and knowing a lot more than just VAT issues is important.

Disclaimer: Please note that this article was written based on the opinions and research of the author. If you are planning on opening your own business in the UK you should seek professional advice.

Sources:

http://en.wikipedia.org/wiki/Value_added_tax