HMRC Launches New Digital Tool: VAT Registration Estimator

HMRC have announced that a new digital tool, the VAT Registration Estimator, has been developed in order to help small business owners determine what registering for VAT could mean for their business.

After consultation with small businesses in the UK, HMRC began the development of a new digital tool to help business owners determine what registering for VAT could do for their business. HMRC found that business owners were unclear about VAT registration, and struggled to understand whether a) it was something they needed to do, or b) something that was beneficial to their business.

It’s important to note that the new tool doesn’t help you with VAT returns if you’re a business that has already registered for VAT, it’s simply a guidance tool designed to help business owners decide if VAT registration is right for them.

Does My Business Need To Register For VAT?

The usual guidance still stands, of course. A business MUST register for VAT if:

• their overall VAT taxable turnover (turnover, not profit) is more than £90,000 in a 12 month period – this new VAT threshold is up from £85,000 which was the case for the previous tax year
• they expect their turnover to tip over £90,000 in the next month
• the business is based overseas but supply goods and/or services to the UK (or expect to in the next month) – the VAT threshold does not apply here

VAT registration essentially means that the business charges VAT on eligible sales they make of goods and services, but they can then claim back the VAT they’ve charged by offsetting it against any purchases they’ve made with VAT for the business.

For most businesses, it’s likely that they’ll charge more VAT in sales than they’ll be charged in purchases, increasing their turnover (and hopefully profits) in the meantime. It’s also true that you’ll enjoy a certain reputation boost by being VAT registered and this can increase your customer base and cash flow still further.

What Is The Purpose Of The VAT Registration Estimator?

According to HMRC, “the estimator can help any business to see what registering for VAT could mean, as well as linking to further information about the registration process” – but if the registration guidance is so clear, then why is a VAT Registration Estimator necessary?

Well, some UK small business owners operating with less than £90,000 turnover each year can still register voluntarily for VAT, in order to enjoy some of the benefits discussed above. This isn’t right for every business, however, and so HMRC’s new tool goes a long way in helping business owners decide if VAT registration is right for them.

Further Information

In order to help business owners understand the tool and what it can do for them, HMRC are hosting a live webinar on 24th July 2024, to explain how to use the tool.

The webinar will show you:

• what the VAT Registration Estimator does
• who can use it
• what information you’ll need to get started
• a step-by-step guide on using the tool

If you would like to learn more about the tool, you can register here and join the webinar from 11:45am – 12:45am (BST).

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