Updated on 18/08/2014
PROS • You will be able to recover VAT on your purchases. • The VAT you can recover will not just be from the date you register for VAT but will include any VAT you have suffered on goods or assets purchased 3 years prior to registering for VAT, providing they are still on hand at the time of registration and that you have the evidence of this such as an invoice. • For VAT on services incurred prior to starting a limited company, these can be recovered up to 6 months prior to the VAT registration. The services have to be for business purposes and you must keep an invoice. • There is generally a considered view that there is an element of credibility in being registered for VAT. If your customers see you as a limited company not VAT registered, they may well think the business is not large enough to service them properly.
CONS • VAT is extremely complicated. • You will have to keep careful VAT records and accounts. • You will have to send in regular VAT Returns. • You may well be subject to a higher level of scrutiny by HM Revenue & Customs. • You may well need additional accounting assistance on VAT issues. • VAT on petrol is an added complication. This post was brought to you by Claudia Graham at Companies Made Simple