Registering for VAT

[Mully79]

I've recently registered as self-employed, as a sole trader, working in my spare time (have a full time job).

However I'm not sure at the moment whether to register for VAT, even though I'll be well below the threshold, it would be to benefit from claiming VAT back on equipment etc. But of course on one of the services I offer I would then have to charge VAT (the other two are either nil or exempt from VAT).

If I leave it for 6 months to see how it goes and then register if I think it's worth it, can I still claim back VAT on purchases before that time (I read somewhere you can claim back up to 3 months before registration date), but then what would happen in the case of me invoicing people prior to that date where I've not charged VAT?

[kempie]

http://www.hmrc.gov.uk/vat/reg-reclaim.htm

[Mully79]

Thankyou for your response although it doesn't really cover the last part about stuff already invoiced, although I assume it has no effect on that.

I think in my current situation I'll just not bother registering, it's just too much of a headache when I have all three elements (VATable, exempt and zero) in one business. And if I ever touch the threshold of having to register, I'll get an accountant to deal with it :o)

[Skyline D]

If you are dealing with exempt supplies then you have to work out what percentage of your business is effectively outwith VAT and, subject to a de minimis limit, the same percentage of input VAT would be disallowed and you wouldn't be able to reclaim it.

You'd be entitled to reclaim VAT in full on supplies towards the normal vatted and zero rated parts of the business.

I've never heard of being able to backdate purchases claim if you register for vat later. Certainly you wouldn't have to go back and charge additional vat on previously invoiced sales .

The very obvious issue if you did choose to regiater for vat is that whatever it is you do would suddenly be 17.5% more expensive for your non-vat registered customers (of the vatted element of the business anyway). Now if all your customers are themselves vat registered it's irrelevant but if they aren't then these people may go looking for a cheaper supplier.

[LCDMAN]

The way my accountant explained it to me when I asked the same question took into acount start-up costs. If you have a lot of start-up costs (office equipment, vehicles, supplies etc.) then it might well be worth it as you can claim back the VAT on these. If you don't have many startup costs then it probably isn't worth it to start with.

Regarding back-dating, you can claim VAT back on stuff after you have applied but before registration is confirmed, but not before that (I believe). You can't retrospectively re-issue invoices to your customers with VAT added though.