• Singapore
  • Hong Kong
  1. Osome Blog UK
  2. The Pros and Cons of Registering my E-commerce Company for VAT

The Pros and Cons of Registering my E-commerce Company for VAT

If you’ve just set up your own e-commerce company, congratulations! Now, you can focus on other aspects of the business and improve your bottom line. Did you know that the registration of Value Added Tax (VAT) can also affect your business?

While most business owners have the misconception that VAT registration is tedious and an additional bill to look after, VAT can also be advantageous to your business.

Read on to find out whether VAT is the right option for you.

Do I have to register for VAT?

It is compulsory for you to register for VAT if your e-commerce business's taxable turnover is more than £85,000 based on a 12-month rolling calendar.

If you are based outside the United Kingdom (UK) but are selling products in the UK or to UK customers, you are also required to register for VAT.

If I’m Not Required To Register for VAT, Should I Still Do It?

Even if your e-commerce business is not required to register for VAT, you may still wish to do so. Voluntary VAT registration comes with its own advantages and disadvantages, which we will explain below to help you make a well-informed decision:

Advantages of Voluntary VAT Registration

  1. Credibility

Registering your business for VAT gives an impression of being more credible and established. By doing so, your customers may think that your business is flourishing and way beyond the start-up phase.

Additionally, having your VAT number reflected on your website and invoices will lead potential investors, suppliers and customers to believe that your company is of a larger scale and profitable with a turnover of more than £85,000, which could lead to more business opportunities.

  1. Concentrate on Business Growth

Even if your e-commerce business is at its infancy, you may be thinking of expanding the scale of business. In this scenario, it may be wise to complete your VAT registration so you can concentrate on business expansion without having to worry about hitting the £85,000 threshold.

Once the VAT registration and the accompanying accounting procedures are out of the way, you can focus all your energy on the core business.

  1. VAT can be Backdated

If you volunteer for VAT registration, you are allowed to backdate your registration by up to 4 years. In effect, this means the business can then claim back VAT incurred up to eight years ago on goods still on hand on its first VAT return: by backdating the registration four years and then being able to go back another four years prior to the registration date.  If you do so, take note that you will have to provide proof to HM Revenue and Customs (HMRC).

  1. Application and Reclamation of VAT

For the sale of almost any of your product or service, you need to apply VAT. Similarly, for most products or services bought from other businesses, you can also reclaim VAT.

Disadvantages of Voluntary VAT Registration

  1. Stringent admin duties, such as handling VAT returns

While voluntary VAT registration comes with perks, a downside would be having to upkeep strict admin duties, especially when it comes to documenting and recording all VAT receipts and invoices. Additionally, you will also have to file VAT returns every three months. These paperwork are compulsory for all VAT registered companies.

  1. Some customers and clients may not be VAT registered

If your customers and clients are not VAT registered, they will not be able to claim back VAT on your products and services. In other words, your VAT-imposed products or services may be deemed too costly to these customers and clients.

  1. May potentially incur a hefty bill

If the VAT earned from your products and services sold surpasses the VAT you made on other products and services purchased, HMRC has the capacity to hand your business a substantial bill.

How to Register for VAT

We hope the above gave you a better idea of the pros and cons of registering your e-commerce company for VAT.

If you’ve decided to register for VAT, you can simply do so online, which will take around 20 days to process. Alternatively, you could do so by post via postal service, which takes up to 30 days to process. However, you can only register by post if you are:

  1. An European Union (EU) business distance selling into Northern Ireland
  2. Importing goods worth over £85,000 from an EU country into Northern Ireland
  3. Registering a group of companies with different VAT numbers
  4. Disposing of assets from which you have claimed 8th or 13th Directive refunds on.


As a general rule, businesses must recover VAT through the VAT return when they are VAT registered in the country where VAT was incurred. If not registered, VAT can be recovered through an EU Refund Claim or 13th Directive procedure (by EU Refund claim we refer to the former 8th Directive). A VAT registration is required when you make taxable supplies in the country.

What Happens after VAT Registration

Once you’re done with registering for VAT, you will have to charge VAT on applicable products and services sold, on both standard rate and reduced rate goods. You are also held responsible for your VAT liability, and should you fail to register when required, HMRC can penalise you and contact the online marketplaces in which you conduct business through. This could possibly lead to your suspension on these platforms and consequentially, the downfall of your e-commerce business.

Grow your Business Without the Stress

We know how stressful it can be to handle a business, but you don’t have to take it all upon yourself.

At Osome, we are always here for you. Work with a dedicated e-commerce accountant. We help you with your filing deadlines, finding reliefs for your company, and arranging documents perfectly.

We also connect directly to all your marketplaces and upload financial statements from there. We then transform them into books, reports, and tax filings. If you sell outside the UK, we help you file VAT there too.

Share this post:

Tips to run your business smarter.
Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

You might like it

Running My Business

How the Increase In National Insurance Contribution Rates Will Impact Your Business

After making it through the pandemic, how will the new Health and Social Care Levy (HSCL) affect your bottom line? Many small businesses will feel overwhelmed. But you can take control by understanding the immediate changes and preparing for the future consequences for your business.


The Ultimate Website Design Guide for E-commerce

If you’re looking to improve your e-commerce page and improve sales, you might want to learn the fundamentals of how to design a good website.

Entrepreneur's Bootcamp

Invoice Best Practice for SMBs in the UK

In this article we’ll unpack some best practice tips to help you improve your invoicing and streamline your biz to take the pressure off your cash flow. Take a look.


A Guide for EU Companies Expanding to the UK: What You Need To Know

Things might have changed after the transitional period, but that doesn’t mean expanding to the UK is not possible. In this guide, we will show you some of the things you need to know when you are planning to expand your business to the UK

Running My Business

Should I Close My Company or Make It Dormant?

Choosing between closing your company for good and making it dormant is a huge decision to make. Before taking that step, get to know what the consequences are for each decision. We’re here to help.


Shopify Plans And Prices Analysis: Which Is The Best?

When you start an online business, you will definitely require a platform like Shopify for you to perform basic business operations. This article helps you to see which Shopify plan is best for the stage of the business you’re at.

Entrepreneur's Bootcamp

Tips To Maintain a Compliance Calendar

The repercussions of missing crucial deadlines extend beyond non-compliance and can even include hefty fines, lost revenues and opportunities, as well as decreased productivity.


How Amazon Sellers Can Better Manage Inventory To Improve Sales & Cashflow

Brand owners and sellers of all scales struggle to seek a well-balanced supply chain. Additionally, Amazon has its own inventory management rules, which makes everything even tougher.


10 Best Hosting Providers for E-commerce in 2021

If you are looking to sell online, the right e-commerce hosting provider can make all the difference. However, with a variety of options out there, choosing the best provider can be confusing.


What an Invoice for E-commerce Businesses Needs To Have

For business owners who own and run an online store, you probably already know that invoices must be sent to your customers for the services you provide or the goods you sell, as a form of purchase proof.


How New Company Owners Should Prepare Financial Statements

After you register your company, you may want to start thinking about your company’s finances such as monthly income, expenses and taxes because UK company owners need to submit their company’s annual accounts to Companies House.


What Are the KYC or Know Your Customer Checks In the UK When Opening a Company?

KYC checks are needed for the authorities to combat money laundering and terrorism financing. You might unwittingly partner up with clients who are using their business relationship with your company to launder money or facilitate other nefarious projects.

Tips to run your business smarter. Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

We’re using cookies! What does it mean?