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How to delay being VAT registered#AskAMS

VAT registration is a problem for small businesses who sell to the general public.

When annual turnover exceeds £85,000, they must register for VAT and pay 1/6th of gross sales to HMRC.  However, you can avoid/delay registration:

  • Restrict annual turnover to less than £85,000 - by limiting customers, closing up for holidays etc. but this is a bit desperate and not a long-term solution.
  • Incorporate into a Limited Company - if a sole trader becomes a limited company (or vice versa), this resets the turnover for VAT registration purposes to zero – buying time before having to register - but if the threshold is exceeded in any 12 month period whilst a sole trader, prior to becoming a company, you will be forced to register for VAT.
  • Split the business into two Limited Companies - where one or both parts of a business have income below the VAT threshold - thus saving a lot of VAT.  It’s vital that each part is autonomous, with separate costs, staff, premises, literature etc. and that there are sound reasons for the split (say geographical or a new market). But, if it is for an artificial reason, HMRC will treat sales for both businesses as though there is only one – meaning that both may need to VAT register. 

Find out more HERE!

AMS Accountancy Swindon and Wiltshire

AMS Accountancy Ltd

AMS Accountants in Swindon provide a complete accountancy service for small businesses in Wiltshire and a monthly accountancy service for contractors throughout the UK.

Delta 606, Welton Road, Swindon, SN5 7XF

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