The current threshold for registering for VAT is a turnover of more than £82,000. If you are at or near this threshold it is essential that you consider whether you need to register for VAT as soon as possible: you must register before you go over the threshold and it is easy to lose track.
- Many chambers encourage tenants to register for VAT well before the threshold. First, it ensures that there is no need for concern about exceeding the threshold and careful monitoring of your finances accordingly. Second, it indicates to solicitors, clients and opponents that you are an established and experienced practitioner. In many civil sets, pupils are encouraged to register as soon as they become tenants even if there is no prospect of them making this kind of money for several years.
- If you undertake Crown Court criminal legal aid work it is recommended you are VAT registered, because your fee claim may have to include the fees of other barristers who worked on the case. If they are VAT registered and you are not, you cannot claim the VAT back from the Legal Aid Agency, but will have to pay the other barristers the VAT out of your own pocket. See the Bar Council’s Graduated Fee Payment Protocol at: http://www.barcouncil.org.uk/media/17782/remgfs5.pdf.
- Don’t forget to add VAT to speaking fees and to writing fees and don’t forget to account for the VAT as well. This applies to income tax as well as VAT.
- Many accountants offer completion of VAT returns for free if they are completing your tax return; look into whether your accountant offers this service.
- VAT returns are required four times a year within a month of the end of each quarter, with the VAT bill to be paid within a couple of weeks thereafter.
- Once you register for VAT, let your clerks know immediately and give them your VAT number so that they can add it to your invoices.
We would recommend setting up a separate savings account into which you can pay the VAT element of every payment you receive. This avoids any panic at the end of the quarter about having the required sum available.