Registering for VAT- What are the criteria?

Doing wholesale business in the UK is one of the most lucrative options available. If you do the things in right way, the chances of becoming successful are high. For the UK wholesale suppliers, with an annual turnover which exceed certain limit, getting registered for VAT is compulsory. There is no way to escape it and those who try so face serious financial penalties. Most of the people, including wholesalers, are unaware about the VAT criteria and are doubtful about whether or not their company needs to get registered for VAT. rnHere, I am discussing the criteria of registering for VAT and some other information related to it. Value Added Tax (VAT) is imposed on sale of products or services. VAT becomes compulsory for any company whose annual turnover exceeds the pre set threshold of 70,000 pounds. Refusing to get registered for VAT may result in severe consequences, including heavy financial penalties, loss of business and imprisonment. Usually, the clothing wholesalers who forget to get registered, with no intention of corruption, are set free after a fine.rnIf you are about to start a wholesale business and are not sure if your company will cross the threshold, you should study your business niche thoroughly and make an estimate about the expected annual profit. If the profit exceeds the threshold by a reasonable margin or even stays close to it, you should consider getting registered for VAT as changing all accounting systems and re-pricing the wholesale products later would be quite a hassle. Besides, many prominent manufacturers, distributors and other registered companies prefer dealing with VAT registered wholesale supplier.rnAs mentioned earlier, VAT is a tax which is applied on the sales of items bought and sold through your business therefore different VAT rates are applied on different products and services. The standard rate for most of the items is 17.5 percent. This means that the customer has to pay an additional 17.5 percent of the product price. The VAT rates for products like fuel and power supplying units used in home, by charities, women’s sanitary and children’s Wholesale Clothing are lower. There are also some products, such as stamps, on which no VAT is applied.rnGenerally, companies pay VAT on quarterly basis but there are options of paying it on monthly basis as well. Always remember that this 17.5% of additional amount you get from each sale is not your own profit but the money you are liable to handover to the VAT authorities. You should always keep the VAT money separated from the sales revenue and keep a clean record of it. Companies, which receive large sums of VAT revenue, keep that revenue in high interest bank accounts and make sound profit from it. The Wholesale Suppliers become liable to collect VAT at the point of sale not when the funds are transferred. So, having an efficient accounting system may help managing accounts easily.rnWhen a company is registered for VAT, compliance with its (VAT’s) regulations is necessary. Regulations of VAT are subject of another guide but remember that the Invoice must contain; the VAT invoice, VAT registration number, and General invoice number. If any major change occurs in the company, wholesale supplier is liable to notify HM Revenue and Customs within 30 days.