Before we jump into the benefits of being a VAT-registered company, here is a quick overview of what we mean by VAT.
VAT, also known as Value Added Tax, is a type of tax collected on the product at the various stages of its development. Starting from the initial production to the last point of sale, VAT plays a significant role in determining the overall price of the product. It is better known as a consumption tax.
In the United Kingdom, companies with an annual turnover of £85,000 or more only have to register for VAT. Most products and services will be subject to the usual rate of VAT. Businesses such as children’s car seats and energy suppliers will benefit from the lower pricing. Food and children’s clothing will be tax-free.
So, what are the advantages of being VAT registered for a small business?
Get a Registered VAT Number
It might not sound that exciting for you and your company. Moreover, it might not help you increase your sales or profits, but having a registered VAT number will undoubtedly help you with documentation and other official paperwork. VAT registration number also affects website marketing and establishment. The VAT number adds credibility to the business and its presence. VAT number provides the brand with a better reputation and broader image.
You Are Eligible To Claim VAT Refund
Once your business has registered with a VAT number, your brand is eligible for claiming a refund of the products and services you manufacture or provide respectively. However, an essential point to keep in mind is that the VAT refund money must be balanced with the amount of money your business is charging and receiving as payments over the year. If you have invested in the machinery, equipment, and plant, you can receive a heavy VAT refund.
You Are Eligible For Reclaiming VAT From The Past
You may be able to claim VAT for products that you haven’t used in the last four years if you register for VAT. It would need you to have been in business for a certain amount of time and keep VAT invoices and records for that period.
Improve Your Brand Image
For small-scale business owners, VAT has a magical effect. If your brand owns a registered VAT number, then all your clients, buyers, and even prospective buyers will be aware of it. As they are already aware of the guidelines required to be a VAT eligible company and your brand’s annual turnover, they will start trusting your brand. The VAT number will be displayed in front of potential customers, and your business will become bigger and better with it.
If your business lacks a professional VAT accountant who can alleviate the stress of VAT reconciling and calculation, reach Pearl Lemon Accountants. They offer vat accounting services and minimize your stress significantly.