By inputting information about your business income and costs, along with the VAT rates applicable to your sales and purchases, you can use this online tool to help you work out:<\/p>\n
- \n
- if you are legally required to register for VAT\u00a0<\/span><\/li>\n
- the point at which your business turnover may require you to register\u00a0<\/span><\/li>\n
- if you can de-register your business for VAT<\/li>\n
- the amount of VAT you might owe to HMRC in an accounting period<\/li>\n
- how much VAT you may be able to reclaim on any eligible purchases your business makes\u00a0<\/span><\/li>\n
- the effect of VAT registration on your profits<\/li>\n
- whether voluntary VAT registration may be worthwhile when your taxable turnover is below the threshold for compulsory registration<\/li>\n<\/ul>\n
You can use it multiple times to experiment with different income and costs scenarios for comparison purposes. This is useful for seeing the potential outcome of various business conditions.<\/p>\n
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\n <\/a>\n <\/div>\n \nThe tool is free to use and available online to all types of businesses. You don\u2019t need a Government Gateway account to access it, so you can even use it for research purposes when setting up a company<\/a> or other types of small business.<\/p>\n
The benefits of VAT registration<\/span><\/a>\n How does voluntary VAT registration work?<\/span><\/a>\n Deregister for VAT – a guide to cancelling your registration<\/span><\/a>\n <\/p>\n
On the launch of the new tool, Jonathan Athow, HMRC\u2019s Director General for Customer Strategy and Tax Design, said:<\/p>\n
“We know that the majority of our customers want to get their tax right. We have listened to what businesses have said and the new tool is designed to help them understand VAT registration, including when they might be required to register.”<\/p>\n
“The VAT Registration Estimator has been developed in partnership with small businesses and trade representatives who tested the online tool and gave feedback before its launch.”<\/p>\n
“We hope it will support businesses\u2019 understanding of VAT registration, especially when combined with our guidance and other services.”<\/p>\n
How to use the VAT Registration Estimator<\/h3>\n
To use HMRC\u2019s VAT Registration Estimator tool, you will need to provide certain information about your business income and costs, including:<\/p>\n
- \n
- the income you\u2019ve received<\/li>\n
- how much you\u2019ve paid for stock or materials<\/li>\n
- the overhead costs associated with running the business<\/li>\n<\/ul>\n
You should be able to find this information in your current and past business records\u00a0(e.g. annual accounts) and any business plans you\u2019ve drawn up.\u00a0<\/span><\/p>\n
You will also need to know the VAT rates that apply to your business income and costs and what proportion of these are VAT-exempt or \u2018out of scope\u2019 for VAT.\u00a0<\/span><\/p>\n
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\n <\/a>\n <\/div>\n \nIf you\u2019re unsure where to find this information, you can check your invoices (for your costs) and HMRC’s guidance page on rates of VAT on different goods and services<\/a><\/p>\n
Once you have all of the relevant details, follow the steps outlined below. The process should take you approximately 20 minutes to complete on the first use.<\/p>\n
Step 1. Visit GOV.UK<\/h4>\n
Visit GOV.UK to access the VAT Registration Estimator tool<\/a> online. Scroll to the bottom of the guidance page and click on \u2018Start now\u2019.<\/p>\n
Step 2. Provide information on your business income\u00a0<\/span><\/h4>\n
In the first section of the tool, you will answer a series of questions about your business income. You will be presented with some or all of the following questions (they may vary, depending on the answers you provide):\u00a0<\/span><\/p>\n
Does your business have an establishment in the UK or Isle of Man?\u00a0<\/span><\/strong><\/h5>\n
For VAT purposes, an ‘establishment’ is a place where:<\/p>\n
- \n
- essential management decisions are made<\/li>\n
- the business carries out its main administration<\/li>\n
- the business has a permanent presence to make or receive supplies of goods or services that are taxable (aka \u2018taxable supplies\u2019)\u00a0<\/span><\/li>\n<\/ul>\n
Taxable supplies are goods or services that are made in the UK and are not exempt from VAT. They include supplies that have a zero rate of VAT.<\/p>\n
Do you sell taxable supplies of goods or services in the UK?<\/strong><\/h5>\n
You should only use income and cost figures for sales made in the UK. If the answer to this question is \u2018No\u2019, you can’t register for VAT in the UK.<\/p>\n
How many months have you based your business income and costs figures on?\u00a0<\/span><\/strong><\/h5>\n
Round to the nearest whole number of months – for example, enter \u201812\u2019 rather than \u20181\u2019 year. The maximum number of months you can enter is 12.\u00a0<\/span><\/p>\n
What is your approximate business income for this X-month period?\u00a0<\/span><\/strong><\/h5>\n
If you\u2019re using your annual accounts<\/a> to obtain this figure, you should be able to find the relevant information in the profit and loss account.\u00a0<\/span><\/p>\n
The figure you provide must relate only to the business you\u2019re checking for VAT purposes. Don\u2019t include any personal income you receive from employment with a different business.<\/p>\n
Is any of this business income out of scope for VAT?<\/strong><\/h5>\n
If you answer \u2018Yes\u2019 to this question, you will also be asked what approximate percentage of this business income is out of scope for VAT.<\/p>\n
Some examples of business income that\u2019s out of scope for VAT are:<\/p>\n
- \n
- supplies of services to a business outside the UK<\/li>\n
- grants or donations<\/li>\n
- personal income (e.g. selling personal possessions)<\/li>\n<\/ul>\n
If you buy and sell second-hand goods, you should include their value as standard-rated for VAT to get a better estimate.<\/p>\n
Is any of this business income exempt from VAT?\u00a0<\/span><\/strong><\/h5>\n
VAT-exempt goods and services differ from zero-rate goods and services, which are taxable for VAT at 0%.<\/p>\n
If you answer \u2018Yes\u2019 to this question, the VAT Registration Estimator will ask what percentage of this business income is exempt from VAT.<\/p>\n
<\/div>\n \nSome examples of goods and services that may be exempt from VAT are:<\/p>\n
- \n
- granting of loans and credit<\/li>\n
- education and vocational training provided by approved organisations<\/li>\n
- selling, leasing, and letting of commercial land and buildings (unless you register for VAT and opt to charge VAT on land and buildings<\/a>)<\/li>\n<\/ul>\n
What rates of VAT does this business income have?\u00a0<\/span><\/strong><\/h5>\n
Choose which of the following rates of VAT apply to the products you sell or provide: standard rate (20%), reduced rate (5%), or zero rate (0%). More than one may apply.\u00a0<\/span><\/p>\n
If any of your supplies are zero-rated or reduced-rate, you must also specify (approximately) what percentage of your business income these VAT rates apply to.<\/p>\n
Step 3. Check your answers\u00a0<\/span><\/h4>\n
The screen will provide an overview of the questions on business income and how you answered them.\u00a0<\/span><\/p>\n
If you notice any mistakes or want to change anything, select \u2018Change\u2019 next to the relevant question to amend your answer.\u00a0<\/span><\/p>\n
When you\u2019re ready to proceed, click \u2018Continue\u2019 to go to the next section.<\/p>\n
Step 4. Provide information on your business costs<\/h4>\n
In the second section of the tool, you will answer a series of questions about your business costs. You will be presented with some or all of the following questions:<\/p>\n
What are your approximate business costs for this X-month period, including VAT paid?<\/strong><\/h5>\n
If you\u2019re using annual accounts to obtain this figure, you should be able to find the relevant information in the profit and loss account. Business costs include:<\/p>\n
- \n
- purchases of stock and materials<\/li>\n
- overhead costs associated with running the business (e.g. rent, utilities, advertising, stationery, and office supplies)<\/li>\n
- costs that are out of scope for VAT (e.g. staff wages and directors\u2019 salaries or drawings)<\/li>\n<\/ul>\n
Enter the value of these costs as a whole number of pounds, including any VAT you\u2019ve had to pay on them.<\/p>\n
HMRC provides detailed guidance on when you can and cannot claim VAT on business costs<\/a>.<\/p>\n
Approximately what percentage of these business costs are out of scope for VAT?<\/strong><\/h5>\n
Some examples of goods and services that are out of scope for VAT are:<\/p>\n
- \n
- wages, salaries, and directors\u2019 drawings<\/li>\n
- business rates<\/a> and business taxes<\/a><\/li>\n
- costs that would normally be taxable, but the supplier is not VAT-registered (e.g. repairs by an unregistered contractor)<\/li>\n
- voluntary donations you make to charity<\/li>\n<\/ul>\n
If you buy and sell second-hand goods, you should include their value as standard-rated for VAT, to get a better estimate.<\/p>\n
Approximately what percentage of these business costs are exempt from VAT?\u00a0<\/span><\/strong><\/h5>\n
VAT-exempt business costs may include:<\/p>\n
- \n
- bank charges and interest on mortgages or loans<\/li>\n
- education and vocational training provided by approved organisations<\/li>\n
- buying, leasing, and renting commercial land and buildings (unless your supplier has opted to charge VAT on land and buildings)<\/li>\n<\/ul>\n
Approximately what percentage of these business costs have a zero rate of VAT?<\/strong><\/h5>\n
Some examples of zero-rated goods and services are:<\/p>\n
- the point at which your business turnover may require you to register\u00a0<\/span><\/li>\n
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