Do you need to register for VAT?

Whether you are a sole trader, partnership or limited company (to name a few types of businesses), if your taxable turnover reaches or exceeds the VAT threshold within any 12-month rolling period, or you expect to reach it within the next 30 days alone, you are required to register for and account for VAT on your sales.  Where the threshold is breached in a 12-month period, you must be VAT registered with effect from 1 month and 1 day after the month you exceed the threshold.  For example, you realised in September you have reached £90,000 on a 12-month rolling basis, therefore you must be VAT registered from 1 November. 

If you expect to exceed this threshold within the next 30 days, you must also register, but you are classed as being VAT registered from the date you had an expectation to breach the VAT threshold.

Late Registrations

We sometimes get calls from businesses contacting us after they have realised, they have reached this threshold.  Sometimes businesses just look at their turnover for the 12 months of their accounting period. For example, a business has a year end of 31 March.

Year 1 – Turnover for the year is £86,000 – below threshold

Year 2 – Turnover for the year is £130,000 – above threshold

This would mean at some point within Year 2 the business went over the threshold of £90,000.  When looking at the 12-month rolling period, in this example, the business went over the threshold in August.  This means they should have registered for VAT and been charging VAT to its customers from 1 October.  So, for 6 months, no VAT has been charged and included on invoices but is now due to HMRC.  The business becomes liable to pay the VAT over on their taxable sales, whether they can go back and charge it to their customers or not.

When registering late for VAT, which will mean submitting late VAT returns, there may be late payment interest due and potentially penalties.

If you realise your business is now in this position, we can help you in advising what input VAT you can reclaim to reduce your overall VAT liability to HMRC and advise how you can go about requesting the VAT owed to you from your customers, wherever possible.

Exceptions

You might find that your business turnover temporarily exceeded the VAT threshold, for example a one-off contract that only lasts 3 months.  Had you not accepted this work, you would have not exceeded the VAT threshold.  If you can prove the turnover will not exceed the deregistration threshold (£88,000) in the next 12 months, then your business can apply for an exception to not be VAT registered. 

Please note, HMRC sometimes take a long time to respond to exception requests, which is not great news when trying to plan for the future.  However, if you believe you have a good case to request an exception from registering from VAT then contact us to consider your options.

Exemption from registration

If most of your taxable supplies have a VAT rate of 0% (zero-rated supplies) you might not need or want to register for VAT.  However, because the law says you must notify HMRC when you breach the threshold, you will need to advise HMRC and request permission not to register for VAT – this is called an exemption from registration.

If you’re a non-established taxable person, all your taxable goods or services must be zero-rated to be eligible for exemption from registration.  Otherwise, for non-established business making supplies in the UK, the VAT registration thresholds do not apply.  Any taxable supply in this case attracts a compulsory UK VAT registration.

Should you wish to discuss any of the points above or if your business has or is about to breach the £90,000 VAT threshold and you would like assistance in navigating all the potential options open to you, then please reach out to our VAT team who would be happy to help.