Sudden business growth - VAT registration

[kate_r]

Hi

If a business starts off with a low turnover but suddenly grows and exceeds the £82k threshold, will the business need to register for VAT immediately? Will all sales thereafter need to be VAT-inclusive? I'm guessing all previous sales could remain as VAT-exclusive since VAT should only be collected after registration. What if revenue continues to rise whilst the VAT registration is being undertaken, how will the excess (revenue generated during "limbo") be treated?

Thanks

 

[StevensOnln1]

At the end of each month you add up the turnover of the previous 12 calendar months, if it exceeds £82,000 you then have 30 days to register with registration beginning from the 1st of the following month. e.g. If you go over the threshold during February you would register for VAT during March with registration beginning from 1st April.

 

[kate_r]

At the end of each month you add up the turnover of the previous 12 calendar months, if it exceeds £82,000 you then have 30 days to register with registration beginning from the 1st of the following month. e.g. If you go over the threshold during February you would register for VAT during March with registration beginning from 1st April.

Consider the following scenario

• January 1 - turnover is £1000
• February 1 - a sharp rise in turnover, e.g., £200k,
• March 1 - register for VAT; turnover continues to rise, e.g., £400k
• April 1 - start collecting VAT

Would the VAT man send a bill for the £400k made prior to the activation of the VAT registration? £400k is a fairly large amount.

 

[john1989]

The VAT threshold is for taxable supplies. Are you making taxable supplies?

With those numbers, I would expect you would have an accountant that could help you with this?

 

[john1989]

Just noticed in another thread that you mention using a bank account. Is that in your name or the name of your company?

 

[kate_r]

The VAT threshold is for taxable supplies. Are you making taxable supplies?

With those numbers, I would expect you would have an accountant that could help you with this?

I was just about to ask about "taxable supplies". My products are made in China and shipped to customers directly from China. Does that mean these are not taxable supplies given that they're not made in the UK?

Those numbers are indeed substantial; I'm just trying to have a grasp on HMRC's expectations.

 

[kate_r]

Just noticed in another thread that you mention using a bank account. Is that in your name or the name of your company?

Indeed. This is in the name of my company. I thought it'd complicate things if it was in my name.

 

[RickyJosh]

Can anyone register for vat no matter what there revenue is ?? I just though it would be handy to claim all our VAT back on the rent, postage, PayPal fees, eBay fees etc.

Josh

 

[john1989]

I was just about to ask about "taxable supplies". My products are made in China and shipped to customers directly from China. Does that mean these are not taxable supplies given that they're not made in the UK?

Those numbers are indeed substantial; I'm just trying to have a grasp on HMRC's expectations.

You still don't see what your products are or where your customers are based.

 

[john1989]

Can anyone register for vat no matter what there revenue is ?? I just though it would be handy to claim all our VAT back on the rent, postage, PayPal fees, eBay fees etc.

Josh

Yes, you can register for VAT voluntarily. But you will have to add VAT to your prices.

 

[RickyJosh]

Right so if we add VAT to the prices do we pay that straight to the VAT man ??

Josh

 

[john1989]

VAT on sales less VAT on purchases = VAT due to HMRC.

You should crunch the numbers and see if it will be beneficial to voluntarily register. Also worth checking the Flat Rate Scheme.

 

[kate_r]

You still don't see what your products are or where your customers are based.

I'm making skincare products in China, which are directly shipped to customers to US, EC and US. Since they're made in China and aren't stored in UK warehouses, does this make them non-taxable supplies? And thus, they're not taken into VAT threshold calculation?

 

[batteryman53]

Kate, You manufacture in China, you ship from China, you stock no goods outside of China, you make your profit in China,You are running a Chinese business. I would be more worried about the Chinese tax authorities.

 

[kate_r]

Kate, You manufacture in China, you ship from China, you stock no goods outside of China, you make your profit in China,You are running a Chinese business. I would be more worried about the Chinese tax authorities.

I'm not running the business from China. The company is incorporated in the UK; it's just that the goods are made in China and shipped from China.

 

[batteryman53]

It is not were you are physically doing the office work or were the company is registered. Think about it. In your small way you are the same as Google and Facebook. They register a company in say Ireland do there business in the UK then say we are not going to pay UK taxes because we run the business from Ireland. The Chinese are going to want their pound of flesh.

 

[kate_r]

It is not were you are physically doing the office work or were the company is registered. Think about it. In your small way you are the same as Google and Facebook. They register a company in say Ireland do there business in the UK then say we are not going to pay UK taxes because we run the business from Ireland. The Chinese are going to want their pound of flesh.

I'm not sure if I understand the analogy. I won't be selling within China as my customers are mainly UK, EU and US-based. Unlike Google and Facebook, I have no staff or operation in China. I have staff in Hong Kong, however. So I don't think it'd be valid to say that I do business in China. Am I missing something?