Forgot to register for VAT (Self employed, £3,000 above threshold)

[SelfEmployedToast]

Hi,

I was going over my accounts earlier as I thought I needed to register for VAT at the end of the month. Unfortunately, I've realised that I performed a calculation error and I needed to register in June!

How would I go about notifying HMRC that I missed when I needed to register?

I'm worried that I'll be hit with the 5% penalty. This will unfortunately be very expensive and I will not be able to afford paying the VAT

I don't have an accountant - my business took off out of nowhere. It wasn't until this month that I realised the 12 months was on a rolling basis - I thought it was the standard tax year. I'm now seeing that I'll need an accountant.

The amount that push me over the threshold occured in June this year. However, it was 370 days past the payment which has caused me to go over in June of last year. I'm assuming this doesn't help though, as HMRC goes off the month rather than specific date?

I appreciate your advice.

 

[spidersong]

Yes it's a month by month basis, however what you need to consider is if you didn't realise it was a rolling basis then what else haven't you realised?

Are you certain you're over the threshold if it's only £3000 then is there anything there that might not count; any exempt income, anything with a place of supply outside the UK, anything that's not in the course of business. etc. etc.

If you are over is there anything that would help, are you likely to have VAT to recover on start up costs, stock, assets. Would the flat rate help or are you a low cost trader.

Some on here may be able to point you in the right direction, although getting a proper accountant on board should be your first step, but we'd need to know what kind of business you're in, who you deal with (public/corporate clients, UK/foreign). Also is this a one off peak or are you remaining above the threshold for the foreseeable future?

 

[SelfEmployedToast]

Yes it's a month by month basis, however what you need to consider is if you didn't realise it was a rolling basis then what else haven't you realised?

Are you certain you're over the threshold if it's only £3000 then is there anything there that might not count; any exempt income, anything with a place of supply outside the UK, anything that's not in the course of business. etc. etc.

If you are over is there anything that would help, are you likely to have VAT to recover on start up costs, stock, assets. Would the flat rate help or are you a low cost trader.

Some on here may be able to point you in the right direction, although getting a proper accountant on board should be your first step, but we'd need to know what kind of business you're in, who you deal with (public/corporate clients, UK/foreign). Also is this a one off peak or are you remaining above the threshold for the foreseeable future?

Thank you for your reply.

Yes, it is only £3000 above the threshold. Fortunately (and in this case unfortunately) I have next to no business expenses which means I'm not able to cancel this £3000 out. I work from home in IT.

This was a one off at the time, for the subsequent months other than December the profit was under £80,000 on a rolling period by a rather large amount.

I work for clients outside the EU however I'm paid in cryptocurrency which is then exchanged for GBP inside the UK (same day, classed as Income Tax). Would this help at all?

 

[TheCyclingProgrammer]

What work are you doing? If you’re performing services to clients outside the UK there’s a good chance that this would be outside the scope of U.K. VAT.

These supplies would not be counted towards your turnover for the purposes of the VAT registration threshold either.

 

[SelfEmployedToast]

What work are you doing? If you’re performing services to clients outside the EU there’s a good chance that this would be outside the scope of U.K. VAT.

These supplies would not be counted towards your turnover for the purposes of the VAT registration threshold either.

Software development, website development. Also maintenance of them.

If this were the case, how would I go about marking the income as originating from a country outside of the EU?

 

[TheCyclingProgrammer]

Software development, website development. Also maintenance of them.

If this were the case, how would I go about marking the income as originating from a country outside of the EU?

If your contract is with a non U.K. company then the place of supply of this kind of work will be where the customer belongs. It’s outside the scope of U.K. VAT and not part of your VAT taxable turnover.

Considering the above I would imagine this brings your relevant turnover below the registration threshold? If so then you don’t need to register or worry about it. Keep evidence of what the income is and who the work was for.

 

[SelfEmployedToast]

If your contract is with a non U.K. company then the place of supply of this kind of work will be where the customer belongs. It’s outside the scope of U.K. VAT and not part of your VAT taxable turnover.

Considering the above I would imagine this brings your relevant turnover below the registration threshold? If so then you don’t need to register or worry about it. Keep evidence of what the income is and who the work was for.

Okay, thank you a lot for your help. All of my work is conducted outside of the EU so that is good to know.

Do you think it's likely that I will be investigated due to my age, income, and not having to pay VAT? I have all the appropriate documentation and save all receipts / invoices, it just seems like a stressful situation to be in.

 

[billmccallum1957]

Don't stress out about it... Get an accountant, give him/her all your documentation and let them deal with it. Then when it's all sorted you will know where you stand.

 

[paulears]

There are other things the accountant can help with. You were worried that you're over the 80 grand turnover and don't have the funds to pay the VAT - so presumably you have spent it or invested it? So your income tax payment is going to be quite high too? If you have no purchases to offset the income, you've made a lot of profit, which has been used up - but on your self-abasement form you will show the income and have no expenses? So a higher income tax rate payer then? The accountant should be very useful and perhaps a bacon saver?

 

[Mr D]

Okay, thank you a lot for your help. All of my work is conducted outside of the EU so that is good to know.

Do you think it's likely that I will be investigated due to my age, income, and not having to pay VAT? I have all the appropriate documentation and save all receipts / invoices, it just seems like a stressful situation to be in.

HMRC investigating won't change anything - if you aren't liable to register for VAT then HMRC are stuck with things as they are.
Must be thousands of businesses where part or all their turnover is not relevant for VAT.

 

[ecommerce84]

Some great advice above for you, as it seems likely you’ll be below the threshold.

Just a couple of other things, which may help - the VAT threshold is £85,000 rather than £80,000 as you mention above (I’m not sure if that was a typo). Although it is on turnover and not profit.

I’d also echo speaking to a good accountant as well - they may be able to offer all sorts of advice that will save you over and above their fee. You may be better off trading as a Ltd company for example. And if you are able to do your own book keeping (which it sounds like you are) an account will be even less costly.

I think you should be commended for having built up a business with such a turnover at 18 - you’ve obviously got a very bright future ahead of you. Keep doing what you’re doing and don’t forget that paying for professional advice is always a good investment.

 

[SelfEmployedToast]

Don't stress out about it... Get an accountant, give him/her all your documentation and let them deal with it. Then when it's all sorted you will know where you stand.

I think that is my best option. Thank you.

There are other things the accountant can help with. You were worried that you're over the 80 grand turnover and don't have the funds to pay the VAT - so presumably you have spent it or invested it? So your income tax payment is going to be quite high too? If you have no purchases to offset the income, you've made a lot of profit, which has been used up - but on your self-abasement form you will show the income and have no expenses? So a higher income tax rate payer then? The accountant should be very useful and perhaps a bacon saver?

Yes, you are correct. I've set aside the money to pay NI / Income Tax, but didn't account for the VAT needed. I am a higher income tax rate payer, yes.

I agree that an accountant would be useful. However, will it help to have an accountant for this tax year seeming as it's coming to the end soon and I have pretty much no expenses? Or should I just get one for the next tax year? I've been looking into running an LTD and dividends + personal allowance on pay roll instead any way.

 

[SelfEmployedToast]

HMRC investigating won't change anything - if you aren't liable to register for VAT then HMRC are stuck with things as they are.
Must be thousands of businesses where part or all their turnover is not relevant for VAT.

I'm aware - I've just heard some horror stories about HMRC investigations so I would rather not deal with one haha! Thank you for the advice though.

Some great advice above for you, as it seems likely you’ll be below the threshold.

Just a couple of other things, which may help - the VAT threshold is £85,000 rather than £80,000 as you mention above (I’m not sure if that was a typo). Although it is on turnover and not profit.

I’d also echo speaking to a good accountant as well - they may be able to offer all sorts of advice that will save you over and above their fee. You may be better off trading as a Ltd company for example. And if you are able to do your own book keeping (which it sounds like you are) an account will be even less costly.

I think you should be commended for having built up a business with such a turnover at 18 - you’ve obviously got a very bright future ahead of you. Keep doing what you’re doing and don’t forget that paying for professional advice is always a good investment.

Apologies, it was a typo. I was at £88k, hence the £3k figure. All that is profit.

I agree in regards to an Ltd. It's something I've been researching and it looks like it would save me a lot of hassle and money. Book keeping is definitely doable, I pretty much have a single expense every month and that is it.

Thank you for your kind words. I will definitely look into finding an accountant.

 

[justintime]

Hi,

The amount that push me over the threshold occured in June this year. However, it was 370 days past the payment which has caused me to go over in June of last year. I'm assuming this doesn't help though, as HMRC goes off the month rather than specific date?

I appreciate your advice.

You do it on a 12 month rolling basis, so I can't see how 370 days later would take you over the threshold. For instance, to go over in June would be to calculate turnover from 1st July 2018 to 30th June 2019, which is 365 days.

Definitely get an accountant, who will advise on the VAT issue. It does sound that on the surface of it that part of your income is VAT exempt, but an accountant will be able to see first hand what that income consists of and where the supply is based. Getting it right now could save a lot of heartache later on.

 

[SelfEmployedToast]

You do it on a 12 month rolling basis, so I can't see how 370 days later would take you over the threshold. For instance, to go over in June would be to calculate turnover from 1st July 2018 to 30th June 2019, which is 365 days.

Definitely get an accountant, who will advise on the VAT issue. It does sound that on the surface of it that part of your income is VAT exempt, but an accountant will be able to see first hand what that income consists of and where the supply is based. Getting it right now could save a lot of heartache later on.

My bad, you are correct. In that case, I did not go over the threshold in June. That's good to know.

I agree with you and the others recommending an accountant. I'll definitely look into it. Thank you!

 

[SteveHa]

This was a one off at the time, for the subsequent months other than December the profit was under £80,000 on a rolling period by a rather large amount.

If this is the case, see the bottom of https://www.gov.uk/vat-registration/when-to-register. You may be able to apply for an exception.

 

[SelfEmployedToast]

If this is the case, see the bottom. You may be able to apply for an exception.

Great, good to know for the future. Thank you.

 

[matlob]

On a side note congrats on setting up a viable business at your age, and whilst doing your a-levels!

Definitely get yourself an accountant. They will more than likely save you more money than what they cost you.

 

[SelfEmployedToast]

On a side note congrats on setting up a viable business at your age, and whilst doing your a-levels!

Definitely get yourself an accountant. They will more than likely save you more money than what they cost you.

Thank you!

 

[BristolBiz]

Wasn't there a certain Mr Branson who got himself into trouble with his VAT returns (allegedly) in his early days.

Hasn't done him too much harm in the long run.

 

[KAC]

Make sure that the accountant that you appoint has experience of cryptocurrency. Most don't

 

[SelfEmployedToast]

Make sure that the accountant that you appoint has experience of cryptocurrency. Most don't

Haha yep good point. I’ve been to one before but he didn’t have any experience with cryptocurrency unfortunately.

 

[Alan]

I work for clients outside the EU

Key point here: VAT is not relevant to you from an income perspective.

If this were the case, how would I go about marking the income as originating from a country outside of the EU?

In your books and records. Normally you would be using an accounting system or spreadsheets, you mark your income per customer and you mark your customer's country or residence.

Overall, as you know nothing about tax & VAT employing an accountant will likely save you more than it costs, for instance are you claiming everything you can legitimately claim? It may even be beneficial to voluntarily register for VAT depending on the figures...

 

[SelfEmployedToast]

Key point here: VAT is not relevant to you from an income perspective.



In your books and records. Normally you would be using an accounting system or spreadsheets, you mark your income per customer and you mark your customer's country or residence.

Overall, as you know nothing about tax & VAT employing an accountant will likely save you more than it costs, for instance are you claiming everything you can legitimately claim? It may even be beneficial to voluntarily register for VAT depending on the figures...

I do use accounting software - I just wasn't sure if I needed to notify HMRC that my clientele reside outside of the EU. Thank you for the information though!

 

[ecommerce84]

Wasn't there a certain Mr Branson who got himself into trouble with his VAT returns (allegedly) in his early days.

Hasn't done him too much harm in the long run.

No, that was Mr Branston. He got himself in a right pickle.