If a business has a turnover below the VAT threshold, what is it required to do?

A business with a turnover below the VAT threshold is not obligated to register for VAT or charge VAT on its sales. The VAT threshold is a specific turnover level established by HMRC, and businesses that do not exceed this threshold can choose whether or not to register for VAT. If a business decides not to register, it does not have to charge VAT to its customers, which is a significant advantage for managing pricing and cash flow for smaller businesses.

Moreover, while it can choose to register voluntarily and charge VAT if it sees a benefit in doing so (for example, if it has significant input tax to reclaim), that registration is not mandatory unless the turnover reaches the threshold. As such, the option stating that it does not have to register or charge VAT accurately reflects the obligations of businesses below the VAT threshold.

The other choices imply requirements that do not apply to businesses with turnover below the threshold, such as mandatory registration or specific reporting requirements concerning VAT. Therefore, the chosen answer appropriately aligns with the regulations governing VAT obligations for businesses operating below the set threshold.