Tax tip: Benefits of a voluntary VAT registration

The 1 April 2024 increase in the VAT registration threshold from £85 000 to £90 000 will have been regarded as good news by many small businesses that sell to customers that cannot recover VAT. It is important to remember however that a voluntary VAT registration can be beneficial in certain circumstances.

If all sales are to customers that can recover VAT a voluntary VAT registration provides entitlement to recover VAT on relevant costs and may improve the credibility of the business from the perspective of its customers and potential customers. Even if a small business sells to customers that cannot recover VAT and are not prepared to pay more for the goods or services a voluntary VAT registration may improve cash-flow if the business incurs significant VAT-bearing start-up costs for example on fitting out premises or buying equipment.

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