VAT desperate please - best way forward

[katytaty]

Hi

hoping someone can advise the best way forward please. husband sole trader builder. last 8years never exceeded threshold for VAT. Books run April to March and I usually do books for self assessment in September. ( i know - stupid, and now very stupid).
Completing books for 2018 -2019 and he exceeded VAT threshold in November 2018. however year end was March 2018. Exceeded by not a little but a lot - nearly 55K over threshhold. Not to mention still trading from April 2019 to current.
Now nearly hysterical having been up all night completely stressed as went through horrific experience during last recession, bailiffs etc and just do not think I can do this again.

Please help advise best way forward asap - do I register him asap or phone VAT people up? i haven't even worked out the turnover from April 19' to now, doing this now. just cannot even think straight.

 

[MyAccountantOnline]

You aren't the first person to have done this and wont be the last.

If you are absolutely certain that you know when your husband should have registered for VAT the best thing you can do is to register ASAP. Dont leave it any longer.

Also sit down and work out exactly what VAT has been underpaid and then start looking at how this can be paid before HMRC start chasing the debt.

 

[Anna Chandley]

Fist step is to work out when your husband exceeded the VAT threshold -it may not be Nov 18.

The VAT threshold is based on a rolling 12 month period and not the accounts or financial year end. At the end of each month you check the turnover for the preceding 12 months to see if you the threshold was exceeded.

For example, at 31 March 2018 you would look at turnover for 1 April 2017 - 31 March 2018 to see if it exceeds the threshold. Then at 30 April 2018 you check the turnover for 1 May 2017 to 30 April 2018 to see if it is over the threshold and so on.

 

[UK Contractor Accountant]

May not be a such a big problem as you think.

Has your husband bought van, tools, plant etc within the last 4 years? if so you can use the vat element of those purchases to mitigate the vat that should have been charged on income.

There is also the VAT flat rate scheme you can use at the 8.5% rate (9.5% for general building sector less 1% discount for first year)

 

[Mr D]

Destress a little. There are ways out of this as provided by the excellent posters above.
Sit down. Have a cup of tea. Relax.

Then work through the options.

HMRC do get a bad name but they are not ogres. Goblins maybe but not ogres.
They can accept payment over time (12 months?) once you know how big the payment is. And can later if needed drop out of VAT registration. Going back to how things were.

Or another option is keep VAT registration and build the business up.

 

[katytaty]

hi
thankyou for replies -very much appreciated.
We think we can go back to 2 companies who he secured large contracts with, one for over 125K and ask for VAT payment to be brought up to date. will help massively.
His turnover so far this year from 1st april is 138K, another little meltdown there but my own fault for not keeping up to date.
Up until nov 18 he definitley had not exceeded the threshold, but the first deposits 20k and then 25k pushed turnover over.

am i right in thinking vat would be charged on his 138k turnover for this year plus approx 55-60 form nov 18 to march 19? and this gives me a rough idea of the vat bill? he has had a lot of smaller 'domestic' customers also, you would normally charge VAT on I think? but obviously we cannot go back to them now.

Can i offset all the vat rated purchases back to nov 18 as well?

 

[katytaty]

would we still qualify for the flat rate scheme? he was a sole trader back in 1998 then to a ltd company which went under in the recession. i will have to read up again on VAT rules, bit of a long time ago now!

 

[justintime]

The other little bit of good news is that if he exceeded turnover in November 2018 VAT doesn't become applicable until January 2019, as long as the turnover wasn't 85k or more in a single month. Yes you can account for purchases made once VAT registered as long as you're not on the flat rate scheme, so from Jan 19 in your case. If you go down the flat rate route ensure that purchases represent more than 2% of turnover. As a rough calculation and based on the 8.5% figure above (1). Say 150k turnover. VAT added at 30k = £180k. VAT payable £15300. How much can you claim back from the large companies?

And something else to consider, is hubby working on new builds? If so, it would be worth checking if any of it is zero rated

(1) Ensure you choose the right category for your hubby's business.

 

[spidersong]

When considering the flat rate scheme (which may help significantly if you can get the main customers to pay VAT), do bear in mind that although you can't generally recover VAT on the things you buy you still can on both certain Capital Purchases over £2000 made after your registration date as well as any goods on hand at the date of registration irrespective of the £2000 limit (assuming you adopt it when you register)

So you may be able to offset a reasonable amount of any tax.

 

[GLAbusiness]

His turnover so far this year from 1st april is 138K, another little meltdown there but my own fault for not keeping up to date.
Up until nov 18 he definitley had not exceeded the threshold, but the first deposits 20k and then 25k pushed turnover over.

Don't forget that his turnover from 1st April is NOT the relevant figure. It is, as said above, a rolling 12 month check.

So in the 12 months to October 2019 his turnover would be 138K plus the turnover from October 2018 to ist April 2019. This is clearly going to be above the threshold. So, what you need to do next is to look at turnover form Septmeber 2018 to September 2019. If this is above thrheshold then go back another month. Repeat until you get to a month where turnover is less than the threshold. This will give you the date when you should have become VAT registered.

 

[Lisa Thomas]

Maybe it's time to think about hiring an accountant to help you to ensure everything is done properly.

 

[katytaty]

Just clarify?
He did not exceed threshold till Nov 18 so one member is advising vat not applicable til Jan 19.
Another member is advising to keep going back month to month over 12 month rolling period to work out vat registration date. That would make registration date much further back than when he exceeded threshold?

Which is correct?

 

[spidersong]

If he didn't exceed the threshold til Nov-18 then doing a 12 month rolling will still bring you to Nov-18 and therefore and effective date of registration of Jan 19.

But you can only know that you exceeded in Nov-18 if you've done a 12 month rolling review. I think looking at your question you haven't understood what they meant with the rolling review.

So say you start business in Nov -17, then in December, January, Feb etc through to the end of October-18 you just look at you turnover since starting and then see if you've passed the threshold. Come November-18 you look at turnover from 1st December 17 to 30th November 18 and see if you've passed, in December you look from 1st January 2018 to 31st December 2018 and see if you've passed, and so on an so forth.

The VAT registration threshold isn't based on your accounting year, if you did £40k a month then you don't get to look at your first years accounts and think £480K that's over the threshold I'd best registry, you'd have looked at the end of the third month and said I passed £85k a few days into this month so I need to register now.

 

[kulture]

In general the month by month calculation over a rolling 12 month period is the correct way to determine your liability and when you should register.

 

[katytaty]

Ok thanks, I will speak to HMRC and make sure register at the right date.
I don't think we will qualify for flat rate scheme as the turnover for this year is already 138k and I think the limit is 150k?

 

[katytaty]

The domestic customers he had, do i have to work out the vat on their bill or not? Can't go back to them now and ask for VAT payments.

 

[Mr D]

The domestic customers he had, do i have to work out the vat on their bill or not? Can't go back to them now and ask for VAT payments.

They paid an amount. Say £1200.
Then the VAT element of that is £200, his element is £1000. So VAT collected even though he was not charging it was £200.

 

[ecommerce84]

Out of interest what do you currently use to do your book keeping?

There are now so many decent software options available from QuickFile and Pandle to Xero and Quickbooks and as you’ll be doing VAT returns going forward you’ll need something that is MTD compliant.

They’ll make your life so much easier too - raising invoices and linking your bank account transactions will literally take care of the income side of your accounts, leaving you to just worry about accounting for expenses.

VAT calculated automatically and submitted at the click of a button. Most will also take care of payroll and payslips too as I assume your husband has employees.

 

[katytaty]

The domestic customers he had, do i have to work out the vat on their bill or not? Can't go back to them now and ask for VAT payments.

 

[Deleted member 59730]

If he is anything like builders I know his Vat on purchases will be high. A builder neighbour had purchases of £90,000 on a £120,000 job.

 

[Scalloway]

The domestic customers he had, do i have to work out the vat on their bill or not?

You will have to account for VAT from the date of registration. So where you are not able to send a VAT invoice to a registered business you will just have to pay over 1/6 of your sales value to HMRC.

 

[katytaty]

hi again
Contacted HMRC who have advised to register for VAT from 1.12.2018. I have looked at registering for VAT when I log into his hmrc account but this is still showing a VAT account and VAT number from the ltd company which dissolved in 2011/2012. But, we deregistered for VAT. Do I apply to register for VAT and get another gateway account? The VAT account for the old ltd company states we owe £38k but he has been a sole trader since 2012. We do not have £38k - advice please.

 

[katytaty]

have checked and we deregistered for VAT 14.12.2011 for the ltd company. I thought a ltd company was its own legal entity so would the £38k have 'died' when the company went under? We have been through the IVA process when the ltd company collapsed.

 

[Scalloway]

Yes I would recommend setting up a new government gateway account for the new company.

 

[katytaty]

thank you very much appreciate the help

 

[Lisa Thomas]

Bear in mind HMRC might insist on a security bond deposit for Newco due to past insolvencies.