Table of Contents
In Short
- E-commerce businesses must register for VAT if their UK taxable turnover exceeds £90,000 over 12 months or expected within 30 days.
- VAT registration is typically done online; businesses receive a VAT number and submit quarterly returns.
- VAT-exempt goods/services exist; accurate VAT records must be maintained.
Tips for Businesses
Ensure timely VAT registration to avoid penalties. Consider voluntary registration if your turnover is below the threshold for potential tax recovery benefits. Keep comprehensive records to streamline VAT submissions.
As your eCommerce business grows and increases sales of your goods or services, this will likely result in a larger profit. However, while you are enjoying the success of your internet brand, there are rules you need to be aware of. One of these is rules requiring value-added tax (VAT) registration. This article explains the VAT threshold for 2024 and how your business can register for the tax.
When Should I Charge VAT?
If your business is registered for VAT, you must add it to most of your products and taxable supplies. As an eCommerce business owner, your taxable supplies are more than any goods and services you sell. They also include when you:
- hire or loan goods to another business;
- sell your business assets;
- make commissions;
- sell items to your staff such as canteen meals;
- use business goods for personal use; and
- make ‘non-sales’ such as gifts and part exchange.
It is also important to note that some goods and services can be exempt from VAT or unaffected by it, the latter of which we term ‘out of scope’.
When creating a tax invoice for your customers, it needs to be HM Revenue & Customs-appropriate. LegalVision’s free Tax Invoice Template will help. Simply customise it and use the built-in formulas to finalise your total.
Do I Need to Register My Business for VAT?
You must register your eCommerce business for VAT if your VAT turnover exceeds £90,000. This is the figure as of 1 April 2024. It applies to UK VAT taxable turnover for either the:
- past 12 months; or
- next 30 days alone.
However, you can still voluntarily register for VAT if your turnover does not reach this figure. You cannot register for VAT if your business only sells VAT-exclusive goods and services.
When you register your business for VAT, you will get a VAT number and need to submit quarterly VAT returns to HM Revenue and Customs (HMRC) and pay the VAT due. You will also need to:
- charge your eCommerce customers the correct amount of VAT; and
- keep accurate VAT records.
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When Should I Register for VAT?
Once your online business exceeds the VAT threshold, you must register with HMRC for VAT within 30 days. You may also notify HMRC within 30 days if you expect your UK taxable turnover to exceed £90,000 within the next 30 days alone. The VAT registration date will be the day you foresee that the taxable turnover will increase in the future.
This is a look-forward registration, and there are no exceptions to the requirement to do this. Notifying HMRC that you intend to register for VAT at the correct times is critical; otherwise, you could face a penalty.
How Do I Register for VAT?
You can register for VAT with HMRC online. However, you should take advice as there are circumstances when VAT registration should be by post. The date you register for VAT is the effective date of registration. Therefore, you will charge VAT for any qualifiable sales made from this date and pay this to HMRC.
When registering for VAT, you will receive a VAT certificate. If you register online, you will also receive a VAT online account, which is where you will submit your VAT returns.
Key Takeaways
Your eCommerce brand may need to pay value-added tax (VAT). This is a tax that some businesses have to charge on their taxable sales. Taxable sales are more than just your goods and services; they can include, for example, when you sell your internet business assets. You must register for VAT if your taxable turnover exceeds £90,000 over 12 months or if you believe you will exceed this figure within the next 30 days alone. Registering for VAT is usually done online, and you will be provided with an online account to submit quarterly VAT returns. There are some instances where a business will have to register by post. If you are registered for VAT, you must keep accurate VAT records.
If you need help understanding the VAT threshold, our experienced eCommerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
The VAT threshold is £90,000, so if your business’s UK taxable turnover over 12 months is above this, it must register for VAT.
Your business will usually register for VAT online, but in some circumstances, you will do so by post.
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