Hi Lisa. Is this a compulsory VAT registration (due to you hitting the turnover threshold) or voluntary? If you're providing goods or services to the public who won't be able to recover the VAT you're charging them I'd say the main thing to consider is how much of the VAT cost you'll pass on to them and how much you'll absorb in to your gross sales margins (bearing in mind you'll also now have reduced your costs by enabling input VAT to be reclaimed on them). Best of luck. Let me know if you need any more specific advice.

www.chaddesleyca.com

Stress I'm just a vat reg biz owner, but the following is what I wish I'd known when I started.

There's no compulsion to register for vat just because you become a limited company, but all businesses (with very few exceptions) have to register for vat when their turnover hits a certain level - see http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm.

I opted to register several weeks before day 1 on my accountant's advice to reclaim the vat on my start-up costs.

If you're mainly selling to vat-registered businesses then they reclaim the vat anyway, so the effect on pricing isn't an issue. It is an issue selling to consumers or the public sector, but if your turnover has hit the limit, you just have to deal with it.

People talk about vat being scary but there's two bits of good news: you get to reclaim the vat on items you buy, so next year when the standard vat rate goes up to 20% that effectively means a 20% rebate on most purchases. I like to think of that as our reward for being an unpaid tax collector.

The other good thing is that the vat return is very easy - total sales, total expenses, total vat charged, total vat paid, plus any EU transactions and a simple subtraction to get the amount you need to send them, or claim back. That's it!

There's plenty of accounting programs that will spit your vat return figs out for you provided you remember to set the correct dates before running the report - been there, got that wrong and looked very puzzled!

You need to log which purchases carry vat at the standard rate, or are zero rated, exempt, or from non-registered suppliers. That info should be on their invoices/receipts along with their vat number - otherwise it's not a proper vat bill.

Obviously, you have to include the appropriate vat rate on your own invoices + your vat number.

I use QuickBooks as you can correct mistakes in individual entries. I believe that's harder in Sage, but not all accountants handle QuickBooks files. There's lots of other software out there and I am no expert - I just use the stuff. Have a word with your accountant as you don't want to run up extra bills by opting for something they find difficult to handle.

Your energy bills may have a non-standard vat rate applied to them so look out for that. Somewhere in the mists of time, I remember having to decide whether it was worth reclaiming car fuel vat as there was a charge involved. May be worth checking that out.

Plus I think it's worth opting to pay the vat after you get paid by your clients, (cash accounting) rather than being liable for the vat at the point when you issue your invoice (accrual accounting) otherwise it's a hassle if someone goes bust and doesn't pay their bill, as you'd have to go through the process of reclaiming the vat. Google cash v accrual accounting for more on this. Remember to tell your software which option you want.

Good luck with it.