Annual turnover thresholds presently €35,000 for services €70,000 for sale of goods, increasing to €37,500 and €75,000 respectively from 01/05/08.
You do not have to register until your annualised turnover looks like it will exceed the threshold amount. You may elect to register if under the threshold. Decisions on electing will depend on the line of business, customer type etc. For a person whose customers are largely non VAT registered ( e.g. the general public) most people are better off not registering until hitting the threshold. If the customer base is largely VAT registered then it may, in some cases, make sense to register while under the threshold as the VAT charged by you is recouped by the customer and you get the benefit of VAT claims on your costs.
If trading while not registered any VAT suffered by you is just included as part of your costs.