Once a limited company has been formed, Companies House will notify HMRC of the company’s incorporation. Roughly three weeks after the formation HMRC will mail a letter to the registered office explaining what the company needs to do next, in this letter you will find the “Unique Tax Reference” or “UTR”. If you do not receive this letter simply contact your local tax office and request that they resend it.
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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.
Registering for VAT
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