Many newly formed limited companies will need to be registered for VAT or Pay As You Earn (PAYE) quite soon after they have been incorporated.  In any case, all newly formed companies should think about whether this will apply to them.

VAT registration can be completed either on a compulsory or voluntary basis.  If you are making taxable supplies (sales) exceeding £68,000 within the last twelve months or a shorter historical period or when there is reason to expect the value of taxable supplies to exceed £68,000 within the next 30 days alone, you will have to register on a compulsory basis.  If this is the case for your new company you will need to register relatively quickly as there are time limits for registration and you could incur penalties if these time limits are not met.

If this does not apply for your new company you may still want to register for VAT voluntarily. One reason could be that it appears to show that you are compliant with the tax authorities. Also it can give the impression to customers and suppliers that they are working with a larger business entity which will sometime have benefits. Another reason is that if all of your customers are VAT registered, the total net price to the customer will not change (as the customer can reclaim the VAT element), however your business will be able to reclaim the VAT suffered on its inputs.

Following your company formation registering as an employer for PAYE can be completed whether you are employing staff or simply need to pay a salary to the directors of the company.  By operating a PAYE system you will deduct the necessary tax and National Insurance from the pay of individual employees and will pay this over to HM Revenue & Customs.

You can complete your PAYE registration as soon as you know the number of staff that will be working for the company and when the first payroll date will be.  If you are going to make salary payments to the directors or employees you should consider registering shortly after your incorporation.

For more information visit Wisteria’s VAT and PAYE pages and form your company now with Wisteria Formations: www.wisteriaformations.co.uk