From Lawpack's Self Employment Kit.
If you register for VAT you will find that you gain from one immediate benefit and possibly suffer from one immediate disadvantage. In addition to this disadvantage you must also realise that being registered for VAT involves certain legal responsibilities.
So, before an explanation of the pros and cons of voluntary registration, you have to ask yourself the following question - 'Am I prepared to take on the responsibility of writing up my accounting records in accordance with certain legal standards, and doing so every quarter?' If you are the sort of person who finds administration, filing and bookwork a chore, you probably should not register for VAT as it will become an extra problem for you.
However, you could avoid this extra problem by employing an accountant to prepare the VAT Returns, but this will cost extra money.
For those of you who are unsure about the answer to this question, it should be emphasised that there are many thousands of VAT-registered traders and, when you consider that many are small businessmen and women with no training in bookkeeping, it should become apparent that keeping proper VAT records is not an insuperable task.
If you are prepared to learn the simple VAT accounting rules and stick to them, then you should certainly consider registering for VAT.
If your turnover is to be above the annual VAT threshold from the start (£64,000 is the 2007/08 figure), then you have no choice in the matter. Registration is compulsory in your case.
What is the benefit of registering? It is so that you can reclaim VAT on most business purchases. If you are not registered, then no reclaim can be made.
What is the possible disadvantage? The possible disadvantage is that you have to add VAT to all your VAT-able sales. This means that all such sales are automatically more expensive than they would be if you were not registered. This might put you at a disadvantage against your competitors if they are not registered for VAT. However, if your customers themselves are registered for VAT (i.e. if you are dealing with other businesses rather than the public) they will in turn be able to reclaim any VAT that you charge and so this would not disadvantage your business.
If you feel that you are prepared to treat VAT registration with the due respect that it requires, and that your sales will not suffer unduly as a result, then you should consider registering.
If your business is one that will attract a regular refund of VAT, you will be offered the chance of receiving your repayment monthly and not quarterly. Unless the sums are considerable (i.e. more than £500 a month), you are advised to resist monthly VAT Returns because attending to them monthly rather than quarterly can become a nuisance.
You may also apply to fill in just one annual VAT Return and pay your VAT over nine months with a balancing payment at the end.
Law stated as at 1 May, 2007
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