When you have to register
You must register for VAT once your VAT-taxable turnover passes the registration threshold in any rolling 12-month period, or if you expect to pass it within the next 30 days. The threshold changes from time to time, so check the current figure on GOV.UK rather than relying on a number you remember.
You can also register voluntarily below the threshold. That can be worth it if you mostly invoice VAT-registered businesses and buy a lot of materials, because you reclaim VAT on purchases. If your customers are consumers, voluntary registration usually just makes you 20% more expensive.
What a valid VAT invoice must show
- A unique sequential number
- Your business name, address and VAT registration number
- The customer's name and address
- The date of issue and the tax point (supply date)
- A description of the goods or services
- The rate of VAT and the amount excluding VAT for each rate used
- The total excluding VAT, the total VAT in sterling, and the amount payable
The rates you'll actually meet
Standard rate (20%) covers most goods and services. The reduced rate (5%) applies to things like certain energy-saving materials and some residential conversions. Zero rate (0%) applies to some new-build work and various goods — zero-rated is not the same as exempt, and you still record it.
If you supply at more than one rate on the same invoice, break the VAT down per rate rather than showing a single figure.
The domestic reverse charge
If you work in construction under CIS and invoice another VAT-registered contractor who isn't the end user, the domestic reverse charge usually applies. You don't charge VAT; instead your invoice states that the reverse charge applies and that the customer accounts for the VAT.
It's a cash-flow change as much as an admin one: VAT you used to hold between receipt and your return no longer passes through your account.