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Table of contents
So, you’re the owner of more than one business trying to work out what this means for your VAT registration status. Not to worry!
Most people understand VAT from a consumer’s point of view, but things look a little different on the other side of the compliance curtain. In this article we’ll explain how VAT registration and reporting works if you run more than one business.
Like the name suggests, Value Added Tax (VAT) is a tax added to the supply of most goods and services in the UK.
There are some exceptions, and so not everything has VAT charged on it. Something is normally exempt if it’s considered to be essential, like insurance, medical procedures, or training costs.
VAT is technically an indirect tax because it’s paid to the government by the seller rather than the consumer. A VAT-registered seller charges VAT on their taxable sales, and then collects it from the customer. The seller then makes VAT submissions to tell HMRC about the VAT it’s collected (as well as any it’s paid as a business).
The threshold for VAT registration is £90,000. It’s based on your VAT-taxable turnover, which is the total amount of sales you make for things which are subject to VAT (i.e., they’re not exempt).
Basically, you’ll usually need to become VAT registered if your business starts making a VAT-taxable turnover at or above the threshold within any rolling 12-month period, or if you think your taxable turnover will reach the threshold within the next 30 days.
Most tax calculations are based on a tax or financial year. VAT registration is a bit different and uses a 12-month period. It resets at the end of every month, so you’ll need to look back and check your taxable turnover during the previous 12 months of trading.
You’ll also need to look forward to the next 30 days. If you reasonably expect to go over the threshold during that time, get registered!
As a sole trader, there isn’t any legal distinction between you and your business (unlike with a limited company). So, if you run multiple sole trader businesses, your turnover for VAT registration is the taxable turnover of all those businesses added together, unless those businesses are demonstrably different from each other.
You’ll still include each business in a separate section on your usual income tax return, but if the nature of each business is obviously unrelated – such as gardening and graphic design – then you won’t need to combine them for the purpose of working out your VAT turnover. Your records must be meticulous to demonstrate what belongs where!
There’s no legal distinction between a sole trader and their business, but the opposite is true for the owner of a limited company. In theory this means the income from each business is ringfenced, so you don’t need to combine the turnover to work out if you need to register for VAT.
But be aware of VAT disaggregation rules.
These rules deal with business owners who set up multiple limited companies in order to spread their earnings out across all them, so each one stays below the VAT registration threshold. It’s actually a form of tax avoidance. Which HMRC isn’t keen on.
If your 12-month turnover is less than £90,000, then you aren’t required to register for VAT.
However, there are some businesses which opt for voluntary VAT registration. Not because it’s fun, but for other reasons. For instance, because it helps them appear like a larger organisation to customers, partners, and investors, or because it will make them more tax efficient.
There are three main ways you can register for VAT:
Sign in to your Government Gateway account (or create one) and request VAT services. Here’s a checklist of things you’ll want to have to hand:
You can register for VAT using a paper VAT1 form, which you send in the post. It’s usually better to do it online (and HMRC encourages this), but postal registration is actually a requirement in certain circumstances, such as:
Alternatively, why not let a professional handle everything? An accountant will simplify the whole process and remove the guesswork for you. Plus, if you already have one who acts on your behalf as an agent, adding VAT registration should be a piece of cake!
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A content writer who enjoys writing in a way that’s fun and engaging, while still being informative and useful to everyday people. I also enjoy writing creatively.
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