When to VAT Register – Partially Exempt Businesses


The VAT registration threshold currently stands at £79,000, this is calculated on a rolling 12 month basis.  A fully taxable business should monitor their turnover at the end of each month to see if they have exceeded this threshold.  However, for businesses who are also in receipt of exempt income, this task is often more difficult.  As a partially exempt business in receipt of both taxable and exempt income they need to keep a separate record of their taxable income in order to ensure that the threshold has not been exceeded. Easier said than done.


One way of doing this, which also lays the groundwork for post registration, exists for users of Sage Line 50 or other similar accounting software packages.  Accounting software allows for different codes to be set up for different VAT liability income streams, for example Sage T1 for standard rated and T2 for exempt.  In Sage accounts there are 99 tax codes available, some of these can be used to split taxable and non-taxable income.  By using these codes, even though the business is not yet VAT registered, it takes away the hard work of calculating the taxable income, at the end of each month a report can be generated to identify the total for each different tax code used.  Please note, the code parameters will need tweaking so Sage doesn’t calculate VAT as well!


As stated above, and when a business becomes VAT registered everything is in place, just the codes will need adjusting to calculate the VAT chargeable on the standard rate supplies.


Chiks can provide advice regarding the VAT registration requirements and also on how to configure your Sage software. Please contact either Carol Watters, VAT Manager on 01772 821021 or Nick Wetherall for Sage queries on 01772 821021.

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