VAT registration is not compulsory when you start a businesses but once your yearly turnover reaches the sum specified by the government in the yearly budget you must register for VAT. To find out the current limits for VAT registration go to the H. M. Customs and excise web site www.hmce.gov.uk

To register for VAT you need to complete form VAT1 and return it to your nearest H. M. Customs and Excise office.

If a business is liable to register for VAT and fails to do so, the late registration will normally result in the VAT being backdated and penalties being imposed. Therefore it is essential that VAT registration is dealt with correctly. If you are unsure as to whether your business needs to register for VAT then consult your accountant who can advise you correctly.

Even if you fall below the VAT registration limits you may still register for VAT, it may be to your advantage to register especially if you have had high start up cost on which you can reclaim the VAT. If you are not registered for VAT then you can not charge VAT on your sales and you can not reclaim the VAT on your expenses.