What disadvantage may arise from registering for VAT?

Registering for VAT can lead to higher prices for non-VAT registered customers because VAT-registered businesses are required to charge VAT on their sales. When a business adds VAT to its prices, non-VAT registered customers, who cannot reclaim this tax, ultimately end up paying more for goods or services. This can create a price disparity between VAT-registered and non-VAT registered entities, potentially alienating price-sensitive customers who prefer to avoid these additional charges.

Additionally, while there are benefits associated with being VAT registered—such as the ability to reclaim VAT on eligible purchases—the obligation to charge VAT can disadvantage certain customers who are not VAT registered. This is particularly significant in sectors where competition is fierce, and customers are highly price-sensitive. Consequently, registering for VAT may inadvertently limit the client base to only those who can absorb or reclaim the added cost of VAT.