VAT registration query

[Bridget1968]

New business is being set up, not sure of turnover therefore been advised to not register for vat.

If the new business then exceeds the £70k allowance am I correct in thinking that they must register for vat at least 30 days before they go over the threshold to comply with HMRC rules.

Another colleague has mentioned that if they go over the £70k they will have to pay vat on all previous sales upto the £70k???I am finding this abit hard to believe.

Could anyone please give me advice on this.

Thanks

 

[integrity]

If the turn over is under the VAT threshold there is no legal reason to register for VAT. However, if you are looking at exceeding the threshold at any time it is prudent to register.

You can not charge VAT until you are registered. So previous customers wont be charged VAT as you were not registered to do so.


There are wider issues with VAT registration. If you voluntarily register (which you can) your business credibility can increase. By not being registered you are saying to the world my turnover is small.

If you have to buy a lot of capital equipment to get started it may also be advisable to register for VAT quarterly paying as you will receive a VAT refund if your VAT outputs are less than you VAT inputs

I hope this helps...

 

[Bridget1968]

Thank you for that.

So i am understanding that is this businesses t/o exceeds £70k they must register for vat and only once registered pay vat.
Therefore understanding that if there t/o exceeds and is £100k they will pay vat on £30k that they exceed the vat threshold and became vat registered?!

 

[integrity]

That is correct.

The VAT threshold changes with each budget I think it is currently £68k.

so until you get to the threshold then no VAT is due.

Let say you register on time and turn over £100k-the £68k to £100k sales will be inclusive of VAT (as the moment you register you MUST charge VAT to your customers).

So in short you are OK not to charge VAT until you approach the current VAT threshold where you MUST register BEFORE you go over that threshold.

It is too risky to leave it to chance as you will be committing an offense if you are trading above the threshold without being VAT registered.

I hope this clears thing up

 

[MyAccountantOnline]

Have a read here this will explain things for you -

http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm

Once you are VAT registered you have to pay VAT on all of your sales (unless they are exempt/zero rated) and you claim back VAT on all of your costs.

 

[David Griffiths]

There are several incorrect statements

The VAT threshold changes with each budget I think it is currently £68k.

£70,000

so until you get to the threshold then no VAT is due.

Let say you register on time and turn over £100k-the £68k to £100k sales will be inclusive of VAT (as the moment you register you MUST charge VAT to your customers).

Not correct. There is a one month gap between exceeding the threshold and registration. Take an example of a company that takes £9,000 per month and starts to trade on 1 January. At the end of July, turnover is £63k, so no need to register. At the end of August, turnover is £72k, so registration must be done within 30 days, and is effective from 1 October. That means that no VAT is payable on turnover in September, even if it's more than £9,000. In fact, if registration is disadvantageous then it pays to cram as many sales as possible into that month.

So going back to £9k per month, £81k of sales escapes VAt and only £27k is charged.

So in short you are OK not to charge VAT until you approach the current VAT threshold where you MUST register BEFORE you go over that threshold.

Not correct. You are only required to register after you have exceeded the registration threshold. You ony have to register in advance if you know (or have reasonable grounds to believe) that you will exceed the £70,000 registration limit in the next 30 days alone. In other words that your sales in that 30 day period will exceed £70k, not that your cumulative sales for 12 months will exceed it.

 

[integrity]

Thanks David for the clarification (though I might say you may need to work on the diplomatic skills)

So the threshold is 70k and one has 30 days to register after the threshold is breached.

Bridget, I still feel that the situation should be monitored before the threshold is reached as if one is on holiday when the threshold is breached 30 days is not long to apply.

At the end of the day do what you feel comfortable with staying the right side of HMRC

Good luck