Are limited companies automatically registered for VAT?

A topic that regularly causes confusion for new limited company owners is VAT (Value Added Tax). Specifically, there’s uncertainty on whether a company is automatically registered for VAT upon its incorporation at Companies House, or if VAT registration needs to be done separately. Here, we look at this and cover some other important information about VAT that new company owners should know. Let’s get started.

Companies are not automatically registered for VAT

Company registration and VAT registration are not connected. When you register a UK limited company, either directly with Companies House or through a company formation agent such as 1st Formations, that company does not automatically get registered with HMRC for VAT.

• VAT registration number – what you should know
• Pros and cons of voluntary VAT registration

Whilst HMRC are automatically notified when new companies are registered, this has nothing to do with VAT registration. Instead, this is to ensure HMRC are aware of the new company and can allocate it a Unique Taxpayer Reference (UTR) – something that is necessary whenever the company needs to correspond with and send anything to HMRC.

VAT and when you need to register for it

Value Added Tax is the tax that VAT-registered companies and other VAT-registered businesses add to their products and services.

The standard VAT rate is currently 20% (check here for the other VAT rates).

From 1 April 2024, any business with a taxable turnover that has surpassed £90,000 in the past 12 months, or is expected to go over this figure in the next 30 days, must register for VAT. This 12-month period is not fixed like the tax year. Instead, it can cover any period of 12 months – for example, the beginning of September until the end of August.

If a business does not meet the £90,000 VAT threshold, it is not required to register for VAT. Despite this, many businesses choose to register for VAT voluntarily because of the benefits registration can provide.

Once a business has been registered for VAT, it should submit a VAT return and pay the VAT it owes to HMRC on a quarterly basis (this can be changed to monthly).

The benefits of VAT registration

If you register your company for VAT, whether this is because you have exceeded the £90,000 VAT threshold, expect to surpass it shortly, or simply wish to do so voluntarily, you can:

• Reclaim VAT on goods or services that your company has bought from other businesses
• Give the impression of being a large, successful and well-established business – something that is appealing to potential customers and other businesses that you are looking to work with
• Impress possible investors, as an increase in your pricing will result in more cash flow
• Improve your bookkeeping, because being VAT registered will require you to be diligent with your financial records

What happens if you don’t register for VAT

Companies are not automatically registered for VAT once they have surpassed the VAT threshold.

If your company has already gone over the threshold, you should register for VAT within 30 days of the end of the month that you went over it. For example, if you went over the threshold at any time in October, you should register before the end of November.

If your company is going to go over the threshold in the next 30 days, you should register before the end of that 30-day period.

If you fail to register your company for VAT once your taxable turnover has gone over £90,000, a penalty fee will be imposed, the total of which depends on how late you are (the minimum penalty is £50).

How to register for VAT

You can register for VAT online directly with HMRC. To do this, you will need your:

• Government Gateway ID and password
• Company name
• Nature of business information
• Turnover information
• Bank details
• Company registration number
• UTR number
• Corporation Tax information
• Pay As You Earn information (if applicable)
• Self Assessment information (if applicable)

Alternatively, we can help register your company for VAT

The VAT registration process can be daunting to some business owners. If you’re concerned about making a mistake, why not let one of our VAT experts take care of registration for you?

If your company has already been set up, our VAT Registration Service can be purchased for £39.99 – or if you’ve not yet formed your company, it’s included in the following company formation packages: Prestige and All Inclusive (£99.99 / £149.99).

The service includes:

• The professional preparation of your VAT registration
• Access to a VAT expert who is on hand to deal with any questions that you may have
• Detailed assistance in opening your Government Gateway account
• Your unique VAT registration number and Certificate of VAT Registration

If you want to know more about this service, click the link above, or if you have any questions, leave a comment and we’ll get back to you as soon as possible.

So there you have it

Are limited companies automatically registered for VAT? No, you must register for VAT independently of the company formation process. Whether you wait until your business surpasses the VAT threshold, or register voluntarily before this, is up to you. We hope you have found this article useful. Thanks for reading.