When does vat become payable?

Jacart · Dec 22, 2008

I have just realised I crossed the vat threshold last month ie £67000. I have informed HMRC and am awaiting an information pack. Could someone please clarify when I am due vat from. Is it from last month when I first crossed the 67000 threshold or is it from the first 3 consecutive months I crossed the quarterly threshold earlier in the year? Hope this is clear. Any info much appreciated. Best regards, Jonathan

jholden · Dec 22, 2008

Once your turnover based on the previous 12 months goes over £67,000, it is therefore a rolling 12 months.

DuaneJackson · Dec 22, 2008

jholden said:
Once your turnover based on the previous 12 months goes over £67,000, it is therefore a rolling 12 months.

So if his turnover from Oct '07 to Nov '08 was the first time he went over the threshhold - is he only expected to charge VAT on invoices as from 1st Nov 08?

jholden · Dec 22, 2008

Assuming turnover will not drop below £65,000 over the following 12 months then you register from the date your turnover based on 12 preceding months goes over £67,000.

Therefore if Nov '08 is when it will tips over the £67,000 you need to contact HMRC and register from the Nov '08 date.

It requires you to be proactive and anticipate when you will pass the threshold by tracking the previous 12 months together with viewing the trading for the following 30 days.

Jason

MyAccountantOnline · Dec 22, 2008

Just to clarify you have to notify HMRC within 30 days of the end of the month in which the yearly limit is exceeded and will be registered from the beginning of the next month, unless you agree an earlier date with HMRC.

David Griffiths · Dec 22, 2008

Putting Nicola's post into context for the OP, if the turnover exceeded the £67k threshold for the first time at the end of Nov 08, then you must notify registration by 30 December and you will be registered and account for VAT from 1 January 2009.

To expand on the above - the VAT certificate will tell you when your first VAT return is due. It might be for three months to 31 March 2009, and the payment will then be due on 30 April (7 days later for electronic filing and payment). You can tell the VAT office what your accounting date is and ask them to match the VAT quarterly return periods with that. It makes life much easier.

And as Jason has pointed out, it's annual turnover that counts, not your total turnover since you started if it was before 1 December 2007.

DuaneJackson · Dec 22, 2008

David Griffiths said:
Putting Nicola's post into context for the OP, if the turnover exceeded the £67k threshold for the first time at the end of Nov 08, then you must notify registration by 30 December and you will be registered and account for VAT from 1 January 2009.

Doesn't this contradict Jasons advice?

jholden said:
Therefore if Nov '08 is when it will tips over the £67,000 you need to contact HMRC and register from the Nov '08 date.

Have I ever said how much I hate VAT?

David Griffiths · Dec 22, 2008

DuaneJackson said:
Doesn't this contradict Jasons advice?

It does, and I think that I am right on that. It may be that Jason has referred to the need to take action, rather than the date that you have to actually register. It could be of course that he's right and I'm not, and I'm always amenable to being corrected!

MyAccountantOnline · Dec 22, 2008

DuaneJackson said:
Doesn't this contradict Jasons advice?

Possibly - thats why I added the posting to clarify the posistion

jholden · Dec 22, 2008

My posting is correct, once you have gone over the limit or know you will within the next 30 days you need to inform HMRC that you should be registered for VAT.

You are supposed to monitor your turnover and therefore know in advance if you are going to exceed the threshold and inform HMRC accordingly.

In terms of practicality, HMRC will give you grace, but they can enforce registration from the date you exceeded the threshold.

HMRC guidance:
When you must register for VAT

If you are in business, you must register for VAT if your turnover for the previous 12 months is above £67,000. This is known as the VAT registration threshold. It changes regularly, so you should regularly check your turnover against the current threshold.
You must also register for VAT if:

you think your turnover may go over the threshold in the next 30 days
you take over a VAT registered business as a going concern
you are selling goods into the UK from another country in the EU and exceed the 'distance selling threshold' - see the section below on registration and international trading
you acquire goods from other countries in the EU totalling more than £67,000 in a year - see the section below on registration and international trading

PS Yes my posting is about when to take action as David commented, and is not the same as Nicola as she has given advise on when registration will happen.

MyAccountantOnline · Dec 22, 2008

I think the confusion was that your post maybe implied if the threshold was exceeded in November the trader would be registered from 1 November which obviously isnt the case.

David Griffiths · Dec 22, 2008

jholden said:
You must also register for VAT if:

you think your turnover may go over the threshold in the next 30 days

.

Accepted that this is lifted from the HMRC site, but what it means is that you must register if you have reason to believe that your turnover will exceed the VAT registration threshold in the the next 30 days alone.

In other words that you will sell more than £67,000 in that 30 day period, not that you have done, say, £65.000 to date (over perhaps 11 months) and the next £3,000 will take you over the limit.

Look at the guidance given in table 2.8 of VAT Notice 700/1

Page 9

That is the only time that you have to register on expectation of future turnover as opposed to historic turnover.

In the example given, my date of registration of 1 January is correct.

Perhaps Kevin Hall or 3-pic, our resident VAT experts, will confirm this.

Jacart · Dec 23, 2008

I've just discovered I am due vat from last April. What are the penalties I am likely to face? For jobs priced and booked in for January how can I now include vat? I'm beginning to wonder if its all been worth it. Thanks everyone for your previous advice, hope you can spare a bit more. Merry christmas to you all.

Jacart · Dec 23, 2008

I used to think ignorance was bliss. Not anymore. A rolling 12 month period will be a costly lesson.

MyAccountantOnline · Dec 23, 2008

Jacart said:
I've just discovered I am due vat from last April. What are the penalties I am likely to face? For jobs priced and booked in for January how can I now include vat? I'm beginning to wonder if its all been worth it. Thanks everyone for your previous advice, hope you can spare a bit more. Merry christmas to you all.

At this stage you do really need to get proper paid for professional advice from an accountant as soon as possible. They will confirm for you exactly when you should have registered for VAT, the VAT involved, penalties and what action you can take etc.

If you want general advice on penalties and VAT registration in advance have a look at www.hmrc.gov.uk and do some searches.

David Griffiths · Dec 23, 2008

Nicola HJ said:
At this stage you do really need to get proper paid for professional advice from an accountant as soon as possible..

Nicola, with respect that's almost all that you ever say. Why not put it in your signature to save you typing it every time?

Of course there are times that people need professional advice, but they don't need that for every question that they ask.

David Griffiths · Dec 23, 2008

Jacart said:
I've just discovered I am due vat from last April. What are the penalties I am likely to face? For jobs priced and booked in for January how can I now include vat? I'm beginning to wonder if its all been worth it. Thanks everyone for your previous advice, hope you can spare a bit more. Merry christmas to you all.

If you are late with VAT registration there is a penalty charge:

Late registration penalty: how much you may be charged

There is a minimum penalty, currently £50, for any late VAT registration.
The total penalty you will pay is based on how much VAT is due from you, and how late you were in registering. The later you register, the higher the penalty you will pay.
HMRC will calculate how much VAT you owe from the date when you should have registered to either the date when HMRC receives your application, or the date HMRC becomes aware that you are required to be registered.
A percentage will then be applied to this figure to calculate your penalty. The percentages are based on how late you register. The current percentages are:

5 per cent if you registered less than nine months late
10 per cent if you registered 9 to 18 months late
15 per cent if you registered more than 18 months late

You can manage this by increasing your input tax claim before you register - buy a van or something else with a big input tax claim

ArcherC · Dec 29, 2008

David Griffiths said:
Nicola, with respect that's almost all that you ever say. Why not put it in your signature to save you typing it every time?

Of course there are times that people need professional advice, but they don't need that for every question that they ask.

David

Bravo!

Well according to Nicola, "You need to see an accountant" "Get professional advise".

I thinks Nicola and other time wasters are here to get free publicity.

Cliver

RAL · Dec 30, 2008

David Griffiths said:
Accepted that this is lifted from the HMRC site, but what it means is that you must register if you have reason to believe that your turnover will exceed the VAT registration threshold in the the next 30 days alone.

In other words that you will sell more than £67,000 in that 30 day period, not that you have done, say, £65.000 to date (over perhaps 11 months) and the next £3,000 will take you over the limit.

Look at the guidance given in table 2.8 of VAT Notice 700/1

Page 9

That is the only time that you have to register on expectation of future turnover as opposed to historic turnover.

In the example given, my date of registration of 1 January is correct.

Perhaps Kevin Hall or 3-pic, our resident VAT experts, will confirm this.

David, you are spot on. I got two books on vat from two publishers (FL Memo and Tolleys') and FL Memo explaines with the examples.

From FL Memo

Looking Back

"If at the end of the month, the previous 12 months' taxable supplies exceeded the threshold applying at that time, the trader must notify Revenue & Customs within the next 30 days, and registration will take effect from the beginning of the following month. So the 13th month is always VAT free".

Looking Forward

"The trader will be liable to be registered where he has reasonable grounds for believing that his supplies in the next 30 days alone will exceed the threshold. Revenue and Customs must be notified within the following 30 days, but the effective date of registration will be first day of that 30 day period.

For example on 13 October Mr D expects his taxable supplies to exceed the registration threshold because of a large order. He must notifiy Revenue & Customs by 12 November and will be registered from 13 October."

Generally I do post confirming other contributors posts. I post only If I think I am adding further information.

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