Depending on the status and the necessity of the business, many businesses go forVAT Registration. Nevertheless, VAT Registration associated with both benefits and drawbacks. Mentioned below are some of the most notable characteristics of such initiative for your reference.
Pros of VAT Registration
– If you run a limited company, after VAT Registration, you are eligible to charge Value Added Tax (VAT) on the products (both goods and services) your business sell. This is the tax that is acknowledged to be output tax.
– A business (as a company), is capable of charging VAT (Value Added Tax), on all the products (goods and services) bought from external vendors. This is what known to be the input tax.
– Businesses that are registered for VAT are capable of acquiring VAT refunds if they deal with zero-rated goods or services and also purchase standard rated (20%) products.
– VAT Registration adds credibility to companies; that is why voluntary registration has become a popular option among the small scale companies that don’t exceed minimum annual threshold.
– Large scale companies prefer to build up partnerships with VAT registered businesses and hence it becomes an advantage for small businesses to enhance their business opportunities. In general, after VAT Registration, a business can display their unique VAT number on all the reference material, promotional materials including websites etc. Such approach is a great way to display the firmness and the stability of a business and attract more large-scale clients. As per the practical situation, when it comes to business sectors such as finance, big companies hardly prefer to deal with businesses that don’t have VAT Registration.
– Upon voluntary VAT Registration, the respective registration can be backdated up to 4 years if there is a possibility to provide all the required evidence to the HMRC without fail.
Cons of VAT Registration
– Some of the customers are not VAT registered. If majority of your customers are not registered for VAT (probably the general public), they are not capable to claim the VAT back. Therefore, before you opt to voluntary registration (upon mandatory registration you don’t have any choice) you should consider the type of your clientele and act accordingly. For those who are not registered for VAT, may find your prices to be too expensive when the VAT is added (particularly because they can’t claim it back).
– Upon all the instances where input tax is less than the output tax of a business, the discrepancy should be paid to the HMRC by respective business. This will be a huge burden for a business, by any chance, if a large VAT bill emerges.
– VAT Registration involves with a considerable amount of paperwork and administrative tasks. For a small business such added tasks can be burdens. However, by hiring a professional VAT expert, they can find a solution for this problem.
Depending on the situation, any business can undo their voluntary registration. Nevertheless, it is always important to consult an expert before registering and deregistering with VAT.