From 1 April 2015 your business needs to register for VAT if your turnover for the previous 12 months is more than £82,000. This test needs to be applied at the end of every month, not just at your year end. You then have 30 days to inform HMRC that your business needs to be registered for VAT and you will be VAT registered from the first day of the following month. For example, if your turnover exceeded the threshold during June 2015 your effective date of VAT registration would be 1 August 2015. Any sales invoices raised before 1 August 2015 would not be subject to VAT.
There is another situation which would trigger a compulsory VAT registration. If at any point you expect your turnover to be over £82,000 in the next 30 days then you should apply to be VAT registered immediately.
When looking at what turnover counts towards the £82,000 threshold you only need to consider taxable turnover (standard, lower and zero rated). If any of your turnover is deemed to be exempt turnover then this can be ignored.
You may be able to claim exemption from VAT registration if you can satisfy HMRC that your turnover has exceeded the £82,000 threshold due to a “one-off” increase in sales. It would also be necessary to satisfy HMRC that your turnover for the next 12 months would not exceed £80,000 (£2,000 less than the VAT registration threshold). Please note that HMRC cannot be “satisfied” if they were never told so it is very important that you claim exemption from VAT registration at the right time.
Failing to register for VAT at the appropriate time (or failing to claim exemption from VAT registration) can have serious consequences for your business. HMRC can impose penalties for late registration (especially if HMRC have prompted the VAT registration) and your business may be hit with a large VAT bill that it cannot afford.
If you need any advice or assistance regarding VAT registration issues please do not hesitate to contact us.
