Of the many tax obligations people must consider, one of them is whether you need to become registered for VAT.

VAT is chargeable on:

  • any supply of goods or services;
  • made in the UK;
  • where it is a taxable supply;
  • made by a taxable person;
  • in the course of furtherance of any business carried on by that person.

Where the value of the taxable supplies in the above scenario exceeds either £85,000 in a rolling-12-month period or in the next 30 days alone, you must register for VAT.

A taxable supply is one which would attract VAT at the standard (20%), reduced (5%) or zero rate. Exempt supplies are not taxable supplies.

A taxable person is someone that is registered, or is required to be registered, for VAT. A person could be a sole trader, a partnership, a limited company, or even a charity.

The made in the UK does not necessarily mean the supplies have to be made wholly within the UK. Where someone is the recipient of goods and services from overseas, those supplies may need to be counted towards the value of the other taxable supplies that person makes in the UK to determine if they have reached the threshold of £85,000.

HMRC used to have a six-stage step to determine if a person was in business. However, they have now simplified it to a simple two-stage step. Now, an activity is for business if:

  • it results in a supply of goods or services for consideration (payment of money or money’s worth); and
  • it’s made for the purpose of obtaining income (remuneration).

The obtaining income step is the newcomer, which may have far-reaching implications for people wishing to register or who are already registered for VAT. Examples of people who may be affected include charities, not-for-profit organisations and even businesses which receive grant income or subsidies.

If you have concerns that you may be affected by HMRC’s revised definition of a business activity, or if you have any other questions about VAT registration or VAT in general, please contact the Tax Team at Robson Laidler or email us directly: taxteam@robson-laidler.co.uk