HMRC launches online tool to check effect of VAT registration

HM Revenue and Customs (HMRC) has launched a digital tool to help businesses estimate what registering for VAT may mean for them.

HMRC said the VAT Registration Estimator has been developed after feedback from small businesses suggested an online tool would be helpful to show when their turnover could require businesses to register for VAT and its effect on profits.

A business must register for VAT if:

• their total VAT taxable turnover for the previous 12 months is more than £90,000 -known as the ‘VAT threshold’ - until 31 March 2024 this was £85,000.
• they expect their turnover to go over the £90,000 VAT threshold in the next 30 days.
• they are an overseas business not based in the UK and supply goods or services to the UK (or expect to in the next 30 days) – regardless of VAT taxable turnover.

A VAT-registered business must charge VAT on eligible sales and can usually reclaim it on eligible purchases. There are around 300,000 new VAT registrations each year.

HMRC said the estimator can help any business to see what registering for VAT could mean, as well as linking to further information about the registration process. It is also a useful tool for businesses operating below the threshold and considering voluntary registration.

“We know that the majority of our customers want to get their tax right. 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,” Jonathan Athow, HMRC Director general for customer strategy and tax design, said.

“The VAT Registration Estimator has been developed in partnership with small businesses and trade representatives who tested the online tool and gave feedback before its launch. We hope it will support businesses’ understanding of VAT registration, especially when combined with our guidance and other services.”

Karen Thomson, Administrative Burdens Advisory Board (ABAB) member, added: “I volunteered to be a tester for the new VAT tool. I am not a VAT expert so approached the experience as if I were a business with no knowledge of VAT.

“Having made some comments, along with other stakeholders, I have now used the final tool and find it very useful. I like that when you are asked for information there are examples, links to guidance where appropriate and help on completing the boxes.

“A lot of work has gone into this tool, and I believe stakeholder views have been considered, to ensure the customer has the best experience possible.”

The VAT Registration Estimator tool can be accessed through GOV.UK guidance pages.

HMRC will host a live webinar on 24 July to explain how to use the free to use tool. It will be made available to view on demand.