An estimated 780,000 small businesses in the UK are unaware of the VAT registration threshold, according to a new survey.
Around 36 per cent of small businesses are unintentionally not paying VAT to HM Revenue and Customs. Research from Direct Line for Business also states that 122,000 small business owners have limited their sales in order to remain under the threshold.
If a business operating in the UK has an annual turnover greater than £82,000 when selling VAT taxable goods and services, then they must register to pay for VAT.
Some UK businesses are going to great lengths to avoid paying VAT. Direct Line for Business states that nearly one-in-ten businesses that are in knowledge of the VAT threshold deliberately minimise their sales in order to stay under the limit. 27 per cent of those businesses temporarily cease trading in order to cap their turnover.
There are many reasons why businesses are doing this. The main factor seems to be that businesses want to lower the rate for their goods and services so they can beat their competitors.
‘‘When running a small business, it is important to remain on top of your finances and insurances. Often entrepreneurs are so focused on growing sales and managing day-to-day business operations, they overlook taking out the relevant insurance protections, or reviewing their tax obligations,’’ said Jasvinder Gakhal, Director of Direct Line for Business.
Companies wanting to find out more about the VAT obligations and how to register can find more information from the HMRC websitewww.hmrc.gov.uk/vat/start/register/when-to-register.htm.