Value Added Tax (VAT) is a sales tax placed on most goods and services sold by VAT registered businesses and individuals. It can be applied at each stage of a supply chain, from production to the final point of sale. VAT is a form of indirect tax that is ultimately paid by the final consumer.

In the UK, VAT is administered by HM Revenue and Customs (HMRC). The standard VAT rate in the UK is currently 20%, although there are reduced rates (5%) and zero rates (0%) for certain goods and services.

There are several reasons why you might want to register for VAT:

• Legal requirement: If your taxable turnover exceeds the VAT threshold (currently £90,000 in a 12-month period), you must register for VAT.
• Reclaim VAT: VAT registration allows you to reclaim VAT on purchases your business makes.
• Professional image: Having a VAT number can make your business appear more established and professional.
• Simplified accounting: Some VAT schemes like the Flat Rate Scheme can simplify your accounting processes.

However, registering for VAT also means you'll need to charge VAT on your goods or services, complete VAT returns, and keep VAT records.

You must register for VAT if:

• Your VAT taxable turnover exceeds £90,000 in a 12-month rolling period.
• You expect your VAT taxable turnover to exceed £90,000 in the next 30-day period.
• You receive goods in the UK from the EU worth more than £90,000 (for certain businesses).

You can also choose to register voluntarily if your turnover is below the threshold. This might be beneficial if you:

• Sell to VAT-registered businesses who can reclaim the VAT.
• Want to reclaim VAT on your purchases.
• Expect to go over the threshold in the near future.

The current VAT threshold is reviewed annually in the UK Budget.

To register for VAT, follow these steps:

1. Create a Government Gateway account if you don't already have one.
2. Visit the HMRC website and use the online VAT registration service.
3. Provide your business details, including your business name, address, bank details, and information about your taxable supplies.
4. Choose your VAT accounting scheme (standard accounting, flat rate scheme, cash accounting, or annual accounting).
5. Select your preferred VAT return periods (monthly, quarterly, or annually).

Once registered, you'll receive a VAT registration certificate containing your VAT number, effective date of registration, and your first VAT return deadline.

You can also register through an accountant or agent if you prefer.

Proper record-keeping is essential for VAT-registered businesses. You must keep the following records:

• Sales and purchase invoices: Keep copies of all invoices you issue and receive.
• VAT account: A separate record showing your VAT calculations.
• Summary of VAT for each return period: Including total sales and purchases, VAT charged, and VAT reclaimed.
• Goods given away or taken from stock: Record the value of these items.
• Adjustments or corrections: Keep records of any adjustments made to your VAT returns.

Records must be kept for at least 6 years (or 10 years if you use the VAT MOSS scheme). They can be kept digitally or on paper, but from April 2022, most businesses must follow Making Tax Digital (MTD) rules, requiring digital record-keeping and submission.

Using accounting software can significantly simplify VAT record-keeping requirements.

Most businesses must submit VAT returns online quarterly. To complete a VAT return:

1. Gather information: Collect all sales and purchase invoices for the period.
2. Calculate the VAT: Determine the VAT charged on sales (output tax) and the VAT paid on purchases (input tax).
3. Complete the nine boxes: The VAT return consists of nine boxes:
   • Box 1: VAT due on sales (output tax)
   • Box 2: VAT due on acquisitions from other EU countries
   • Box 3: Total VAT due (Box 1 + Box 2)
   • Box 4: VAT reclaimed on purchases (input tax)
   • Box 5: Net VAT to pay to HMRC or reclaim (Box 3 - Box 4)
   • Box 6: Total value of sales excluding VAT
   • Box 7: Total value of purchases excluding VAT
   • Box 8: Total value of supplies to other EU countries excluding VAT
   • Box 9: Total value of acquisitions from other EU countries excluding VAT
4. Submit the return: Use the HMRC online service or compatible software to submit your return.
5. Pay any VAT due: If you owe VAT (Box 5 is positive), you must pay HMRC by the deadline.

VAT returns must typically be submitted within one month and seven days after the end of your VAT period. Payments must be made by the same deadline.

Making Tax Digital (MTD) for VAT now requires most businesses to keep digital records and submit VAT returns using compatible software.