Important: This tax guide, and the Malgra Tax Guide website are designed for non-VAT registered self employed Slimming World consultants. The below guidance is provided only as a background to VAT.
Value Added Tax (VAT)
As your business grows, you’ll be earning more income.
You must register for VAT (Value Added Tax) if your VAT taxable turnover (income) goes over the annual tax ‘threshold’. This means that your business has earned over the threshold during the financial year.
The current VAT threshold is £85,000
If you know you’re going to exceed the threshold, or if the threshold has been exceeded in the past 12 months, you must register with HMRC for VAT. There is only a 30-day period to register for VAT from when the business has passed the threshold, or where the threshold is known to be hit over the coming month.
VAT runs over the last 12-months and not the financial year. For example, you could exceed the threshold between September 2017 – August 2018. The dates are not fixed to the financial year which runs from 6 April – 5 April each year.
With the 30-day period mentioned above, if you notice in August 2018 that you’re going to pass the threshold in the next month, you should register for VAT as soon as possible, within 30 days of when the business passes this amount.
What if I register late?
If you register late for VAT after passing the threshold, you will need to pay HMRC immediately any VAT which is due, and a penalty may be applied depending on how late your registration is.
How to check if you’re approaching the threshold
It is seen as a good thing to keep accurate records on your business, and our online guide provides details of items you’ll need to consider to keep track of your business turnover, expenses and (ultimately) the profit made.
From your monthly accounts, you should be able to view your overall turnover for the business – this is any income which has been received, such as member fees, shop sales or other business income generating activity before any expenses have been deducted. You can find a list (not exhaustive) in this guide.
How to register
Most businesses can register online with HMRC.
De-registration
You can de-register from VAT when you’re no longer eligible to be registered. This may be when you cease trading, or if your turnover drops below £83,000. This can also be completed online with HMRC.
VAT Registration Exceptions
If you become eligible for VAT, however then realise that you’ll not be registered in the next 12 months, you can apply for exception from paying VAT.
For example, if you exceed the threshold over a 12 month period but have evidence to show your income will drop below £83,000 (e.g. ending self employment, reducing group cover, etc), you can ask HMRC for an exception.
You’ll need to write to HMRC to request this.