Does a New UK Company Need to Register for VAT?

A new UK limited company does not automatically need to register for VAT when it is incorporated.

VAT registration normally becomes compulsory when the company’s VAT-taxable turnover exceeds the registration threshold. A company below the threshold may still choose to register voluntarily.

The current UK VAT registration threshold is £90,000. Because tax thresholds can change, company directors should always confirm the current amount with HM Revenue and Customs.

When Must a New Company Register for VAT?

A UK company must generally register for VAT if either of the following applies:

• Its VAT-taxable turnover for the previous 12 months exceeds £90,000.
• It expects its VAT-taxable turnover to exceed £90,000 within the next 30 days alone.

The first test uses a rolling 12-month period, not the company’s financial year or the calendar year.

Directors should therefore review turnover at the end of every month. A company cannot wait until it prepares its annual accounts to check whether it has exceeded the threshold.

The current threshold and registration rules are available in HMRC’s VAT registration guidance.

Is VAT Registration Required Immediately After Incorporation?

Usually, no.

Companies House does not automatically register a newly incorporated company for VAT. Incorporation, Corporation Tax registration and VAT registration are separate processes.

A new company can normally begin trading without VAT registration if:

• Its taxable turnover remains below the registration threshold.
• It does not expect to exceed the threshold within the next 30 days.
• No special registration rule applies to its activities.

However, the company should monitor its taxable turnover from the beginning of trading.

What Is VAT-Taxable Turnover?

VAT-taxable turnover is the total value of sales that are not VAT-exempt or outside the scope of UK VAT.

It generally includes supplies that would be:

• Standard-rated
• Reduced-rated
• Zero-rated

Zero-rated sales still count towards the registration threshold, even though the applicable VAT rate is 0%.

For example, a business selling only zero-rated products could exceed the threshold and still become liable to register.

VAT-taxable turnover can also include certain:

• Goods hired or loaned to customers
• Business goods used privately
• Bartered or part-exchanged goods
• Gifts of business goods
• Reverse-charge services received from overseas suppliers
• Domestic reverse-charge transactions

The precise VAT treatment depends on the nature and location of each supply.

What Does Not Count Towards the VAT Threshold?

The following will not normally be included:

• VAT-exempt sales
• Income outside the scope of UK VAT
• Loans received by the company
• Money invested by shareholders
• Dividends received
• Most sales of capital assets
• Salary or employment income earned personally by a director

Exempt and zero-rated sales must not be confused. Zero-rated sales normally count towards the threshold, while exempt sales generally do not.

Examples of exempt activities may include certain financial, insurance, educational, property and healthcare services. Exemption rules are detailed and should be checked carefully.

How Does the Rolling 12-Month Test Work?

The VAT threshold is measured using the company’s taxable turnover during the previous 12 months.

It is not based on:

• The company’s accounting year
• The tax year
• A January-to-December calendar year
• Turnover since incorporation only

At the end of each month, the company should total its VAT-taxable turnover for the preceding 12 months.

Example

A company reviews its records at the end of August. Its taxable turnover from the previous September to August is £92,000.

Because its rolling 12-month turnover has exceeded £90,000, it must normally register within 30 days of the end of August. Its effective VAT registration date would generally be 1 October.

The company may have to charge VAT from its effective registration date even if HMRC has not yet issued its VAT number.

What Is the 30-Day Future Turnover Test?

A separate rule applies when the company expects to exceed the VAT threshold within a single 30-day period.

This test may apply when a new company wins a large contract or receives a substantial order.

Example

A company with very little previous turnover signs a contract on 10 June under which it expects to make £100,000 of taxable supplies during the following 30 days.

It must normally notify HMRC by the end of that 30-day period. Its effective registration date is generally 10 June—the date it first knew that the threshold would be exceeded.

This rule can make VAT registration compulsory before the company has received payment from the customer.

Can a New Company Register Voluntarily?

Yes. A company can normally apply for voluntary VAT registration even if its taxable turnover is below £90,000.

A business may consider voluntary registration if it:

• Has substantial VAT-bearing business expenses
• Mainly sells to VAT-registered businesses
• Imports stock or equipment
• Expects to exceed the threshold soon
• Wants to recover eligible VAT on purchases
• Wants to establish its VAT systems before growing

However, voluntary registration creates the same general compliance responsibilities as compulsory registration.

What Are the Advantages of Voluntary VAT Registration?

Potential advantages include:

• Reclaiming eligible VAT paid on business purchases
• Recovering qualifying VAT on some pre-registration costs
• Avoiding an urgent registration process when turnover grows
• Making it easier to trade with customers that expect VAT invoices
• Establishing VAT procedures at an early stage

Voluntary registration can be particularly attractive when the company mainly sells to VAT-registered business customers. Those customers can generally reclaim the VAT charged, subject to the normal rules.

What Are the Disadvantages?

Possible disadvantages include:

• Having to charge VAT on taxable UK sales
• Increasing prices for customers who cannot reclaim VAT
• Submitting VAT returns
• Keeping digital VAT records
• Using compatible software
• Paying VAT due to HMRC on time
• Applying the correct VAT rates
• Managing invoices, credit notes and evidence
• Dealing with overseas and reverse-charge transactions correctly

Registration may make a company less competitive when it mainly sells to consumers, charities or organisations that cannot recover VAT.

The decision should be based on the company’s customers, costs, profit margins and expected growth—not simply on whether registration appears more established.

Does a Dormant Company Need to Register for VAT?

A genuinely dormant company will not normally need VAT registration because it is not making taxable supplies.

However, a company can be dormant for Corporation Tax or Companies House purposes while its VAT position requires separate consideration. The definitions used for different taxes and filing obligations are not always identical.

If a VAT-registered company stops trading, registration does not automatically end. It must continue meeting its VAT obligations until HMRC cancels the registration.

Does a Company With No Profit Need to Register?

VAT registration is based on taxable turnover, not profit.

A company may have:

• High sales
• Significant expenses
• No accounting profit
• A trading loss

It could still be required to register if its taxable turnover exceeds the threshold.

For example, a company with £100,000 in taxable sales and £105,000 in expenses has made a loss, but its turnover may still require VAT registration.

Must an Online Shop Register for VAT?

An online shop follows the same basic turnover test, but additional rules may apply depending on:

• Where the goods are stored
• Where customers are located
• Whether goods are imported
• The value of individual consignments
• Whether an online marketplace facilitates the sale
• Whether the customers are businesses or consumers
• Whether the company holds stock in another country

A UK company selling through its own website, Shopify, Amazon, eBay or another marketplace should not assume that the platform handles all VAT obligations.

Storing inventory in an EU country or another jurisdiction can also create overseas VAT registration obligations, even when the company is below the UK threshold.

Do Sales to Overseas Customers Count?

The answer depends on the goods or services supplied, the customer’s location and the applicable place-of-supply rules.

Some exports and international supplies may be zero-rated. Zero-rated UK supplies can still count towards VAT-taxable turnover.

Other transactions may be outside the scope of UK VAT because the place of supply is outside the UK. Those sales may not count towards the UK registration threshold, although they could create tax obligations in another country.

International companies should determine the VAT treatment of their transactions rather than treating every overseas sale in the same way.

What About Companies Owned by Non-UK Residents?

Having overseas directors or shareholders does not, by itself, remove a UK company from the VAT rules.

A UK company should consider:

• Where the business is established
• Where its management and resources are located
• Where its goods are stored
• Where supplies take place
• Whether it has a fixed establishment
• Whether customers are businesses or consumers

Separate rules apply to a business that is not established in the UK but makes taxable UK supplies. A non-established taxable person may have to register from its first taxable UK supply because the normal registration threshold might not be available.

A UK-incorporated company is not necessarily treated as established in the UK for every VAT purpose solely because it has a Companies House registration and registered office.

Can Several Companies Each Use the VAT Threshold?

Using more than one company does not automatically provide a separate VAT threshold for what is effectively one business.

HMRC may treat businesses as artificially separated if activities have been divided mainly to avoid VAT registration. Relevant connections can include:

• Common ownership or management
• Shared staff
• Shared premises or equipment
• The same customers
• Related business activities
• Combined marketing
• Financial dependence
• One business referring work to another

Separate companies carrying on genuinely independent businesses may each have their own VAT position. Artificial separation can result in HMRC directing that the activities be treated together.

How Does a New Company Register for VAT?

Most companies can apply through their HMRC business tax account.

The application may require:

• The company registration number
• The company’s UTR
• Business bank account details
• The date trading began
• Estimated taxable turnover
• A description of business activities
• Details of goods or services supplied
• Information about associated businesses
• The requested effective registration date

HMRC may request contracts, invoices, bank statements or other evidence before approving an application.

A company can authorise an accountant or tax agent to assist, but the directors remain responsible for providing accurate information.

What Happens After VAT Registration?

Once registered, the company will normally need to:

• Charge VAT at the correct rate
• Include its VAT number on VAT invoices
• Keep digital VAT records
• Submit VAT returns
• Pay VAT due by the applicable deadline
• Retain appropriate supporting evidence
• Apply reverse-charge rules where relevant

VAT-registered businesses generally have to comply with Making Tax Digital requirements and use compatible software to maintain records and submit returns.

The company should not show VAT as a separate charge on invoices before it is registered. If registration is pending but the effective date has passed, it may need to adjust invoices after receiving its VAT number.

Can the Company Reclaim VAT Paid Before Registration?

A newly registered company may be able to reclaim eligible VAT incurred before its registration date.

Subject to the applicable conditions, this can include VAT on:

• Goods purchased up to four years before registration, if the company still holds them or they were used to produce goods still held
• Services received up to six months before registration

The purchases must relate to the company’s taxable business activities, and valid VAT invoices and records must be retained.

Restrictions can apply to private use, exempt activities, entertainment, cars and other categories.

What Happens If a Company Registers Late?

A company that misses its compulsory registration deadline should apply immediately.

Late registration can result in:

• VAT becoming payable from the date registration should have taken effect
• The company having to fund VAT that it failed to charge customers
• Interest on overdue amounts
• A possible late-registration penalty
• Corrections to previously issued invoices and accounting records

HMRC may require VAT on historical sales even when the company can no longer recover the amount from its customers.

Regularly monitoring rolling turnover is therefore essential.

Can a Company Avoid Registration After Temporarily Exceeding the Threshold?

A company may apply for an exception if its turnover exceeded the threshold temporarily and it can demonstrate that future taxable turnover will remain below the deregistration threshold.

The exception is not automatic. HMRC must accept the application.

The company should not simply decide that registration is unnecessary because an unusually large transaction caused the threshold to be exceeded.

VAT Registration Checklist for a New Company

Directors should:

• Identify which sales are taxable, exempt or outside the scope of VAT.
• Include zero-rated sales in the turnover calculation.
• Monitor taxable turnover every month.
• Use a rolling 12-month total.
• Consider the separate 30-day future-turnover test.
• Review international sales and imports separately.
• Decide whether voluntary registration is commercially beneficial.
• Register promptly when the threshold is exceeded.
• Keep invoices and evidence supporting the VAT treatment.
• Use compatible accounting software after registration.

Frequently Asked Questions

Can a new company trade without VAT registration?

Yes, provided it is not required to register under the turnover or special registration rules. It must not charge VAT while unregistered.

Is the £90,000 threshold based on profit?

No. It is based on VAT-taxable turnover before deducting business expenses.

Does zero-rated turnover count towards the threshold?

Yes. Zero-rated supplies are taxable supplies and normally count towards the registration threshold.

Do exempt sales count?

Generally, no. However, distinguishing exempt supplies from zero-rated or outside-the-scope supplies is essential.

Can a company register before making any sales?

It may be possible to register as an intending trader if the company can demonstrate a genuine intention to make taxable supplies.

Is voluntary registration permanent?

No. A company can apply to cancel its registration if it meets the deregistration conditions. The current voluntary deregistration threshold is £88,000.

Final Answer

A new UK company does not automatically need to register for VAT when it is incorporated.

Registration normally becomes compulsory when its VAT-taxable turnover:

• Exceeds £90,000 during any rolling 12-month period; or
• Is expected to exceed £90,000 within the next 30 days alone.

A company below the threshold can choose voluntary registration, but it should consider the effect on prices, customers, administration and VAT recovery first.

Because VAT depends on the type and location of supplies—not simply total income—companies dealing with overseas customers, imports, marketplaces or exempt activities may need specialist advice.

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