Thurrock Essex Accountants, Trueman Brown, are a small firm of accountants who believe in keeping the clients informed of up-to-date developments.

Back in 2011, HMRC launched a campaign to encourage businesses to voluntarily disclose their failure to properly register for VAT. Whether this campaign was successful or not, a lot of businesses still have problems understanding the rules regarding VAT Registration.

The business should register for VAT if:-

  • At the end of any month the value of the business’s taxable supplies in the previous twelve months or less exceeds the registration threshold (2016/17: £83,000); or
  • The value of taxable supplies in the next 30 days alone is expected to exceed the threshold.

If the business can demonstrate that the scale of its taxable supplies has only temporarily risen above the VAT threshold and that will reduce in the future below the deregistration threshold (2016/17: £81,000) then it can apply to HMRC for an exemption from registration.

So what does this mean in practice?

Example:

Joe commenced business on 1st January 2016. Based on the results shown below, should Joe register for VAT and when should that be (assuming the registration threshold is constant at £83,000)?

 

Month Ended

 

Taxable Supplies

Taxable Supplies In Last 12 Months
January 2016 £2,500 £2,500
February 2016 £6,200 £8,700
March 2016 £6,500 £15,200
April 2016 £7,800 £23,000
May 2016 £7,200 £30,200
June 2016 £7,200 £37,400
July 2016 £7,600 £45,000
August 2016 £7.400 £52,400
September 2016 £8,700 £61,100
October 2016 £8,000 £69,100
November 2016 £7,500 £76,600
December 2016 £4,200 £80,800
January 2017 £4,200 £82,500
February 2017 £6,500 £82,800
March 2017 £7,200 £83.500

 

Joe exceeded the registration threshold  at the end of March 2017 and he should be registered for VAT within 30 days (i.e. commencing from 1st May 2017).

Penalty Regime

The penalties for not registering for VAT can be severe depending on the VAT liability that will be due and the length of time the business was late in registering.

Time Late In Registering Penalty Rate
Under Nine Months Late 5%
Between Nine and Eighteen Months 10%
After 18 Months Late 15%

There is a minimum liability of £50!

Thurrock Essex Accountants, Trueman Brown can assist you to register in time. Please contact us on 01708 671910 or complete the form below.