HMRC Introduces VAT Estimator Tool

Do you run a small business, but you’re unsure if you should be registering for VAT? If so, you’ll be pleased to know that HMRC has just launched a new VAT estimator tool that’s designed to help you determine just that.

In this article, we’re going to take a look at why the new VAT estimator tool is being launched and how it works.

What is the current threshold for VAT registration?

Each year, there are around 300,000 new VAT registrations, but how do you know if your business should be one of them? This depends on whether or not you’ve met the VAT registration threshold.

Currently, a UK business must register for VAT if:

• Total VAT taxable turnover for the previous 12 months is more than £90,000.
• The business expects turnover to go over the £90,000 VAT threshold in the next 30 days.
• It’s an overseas business not based in the UK and supplies goods or services to the UK (or expects to in the next 30 days), regardless of VAT taxable turnover.

Once a business is VAT-registered, it must charge its customers VAT on eligible sales, while it can usually claim it back on eligible purchases.

Why is HMRC launching this tool?

The purpose of this new tool is to help businesses to estimate what registering for VAT may mean for them. HMRC had received feedback from small businesses that a digital tool would be useful for showing when their turnover could require them to register for VAT, and what the effects on their profits would be.

The estimator tool is designed to help any business understand what registering for VAT could mean for them, as well as provide further information about the registration process. The tool can also be used by small businesses that fall below the threshold, but that are thinking about voluntary registration.

“We know that the majority of our customers want to get their tax right,” said Jonathan Athow, HMRC Director General for Customer Strategy and Tax Design.

“We have listened to what businesses have said and the new tool is designed to help them understand VAT registration, including when they might be required to register.”

“We hope it will support businesses’ understanding of VAT registration, especially when combined with our guidance and other services.”

How to use the VAT Registration Estimator

The new VAT Registration Estimator is free to use and should take around 20 minutes to complete. Before you start, make sure you’ve got information about your business’ income and costs to hand, as well as the VAT rates that apply to them. It will also help to read the information available online about what the tool does first.

When using the VAT Registration Estimator you’ll need to follow these steps:

1. Input where in the UK your business is (or will be) based.
2. Provide your approximate business income and costs for the time period you wish to estimate, up to a maximum of 12 months.
3. Using the guidance links provided, choose the VAT rate(s) for your business income and costs—as an estimated percentage of zero, reduced or standard rated, or VAT exempt, goods and services.
4. Say if you’d prefer to add VAT to, or absorb VAT into, your current or estimated selling price.
5. Review your answers and complete the form to review the results.

Note that the estimator is available via GOV.UK guidance pages—not the Government Gateway.

How Warr & Co help small businesses with VAT registration

We’ve worked with small businesses across the UK with VAT accounting services. Although for many this can be a fairly simple process, for others it’s much more complex—and that’s where we can make a difference.

In addition to supporting our clients with VAT registration and deregistration, the services we offer include:

• Bookkeeping analysis for VAT efficiency
• Submission of VAT returns
• VAT planning
• Advice on exemptions and partial exemptions
• Handling VAT disputes with HMRC
• Flat Rate Scheme advice
• VAT compliance advice

To find out more about how we can help your small business with VAT accounting, get in touch with our expert team today.