Companies should register for VAT if the value of their taxable supplies in a 12 month period is greater than the current VAT registration annual threshold of £81,000 (from 1st April 2014).

Businesses should also register for VAT if the predicted value of their taxable supplies in the next 30 days alone is expected to exceed the annual VAT threshold. It is important to remember that turnover is the amount of money going through the business, not just the profit.

All VAT-registered businesses must submit their VAT returns online, and settle any outstanding tax liabilities electronically.

Alongside the main VAT rules, some small businesses may be better off by operating within the flat rate VAT scheme which has been running since 2002.

In essence, instead of paying HMRC the total VAT charged on invoices minus any input VAT you may reclaim, you charge a fixed percentage of your gross turnover and pay that amount to HMRC each year.