With inflation rising as well as businesses reopening after COVID restrictions, I thought it would be useful to remind all non-VAT registered business owners the rules regarding when you need to VAT register. As even though your profits may not have increased, current inflation levels could lead to your turnover exceeding the VAT registration thresholds.

When you must register for VAT

For UK based businesses, you must VAT register when either :

  • Your VATable supplies in the last 12 months are over £85,000;
  • Or you expect your VATable supplies to go over £85,000 in the next 30 days – this is not usually relevant of course for smaller businesses.

This first bullet point catches a lot of businesses unaware. It is important to stress that you need to look at your VATable supplies at the end of every month and total up the last 12 months (it is a running total). It is not according to accounts or tax year.

VATable supplies are any supply made in the UK which is not exempt VAT.

When to notify HMRC

If you exceeded £85,000 VATable supplies in the last 12 months, you must VAT register with HMRC within 30 days. You will be effectively VAT registered from the first day of the second month after you go over the threshold.

For example:

If you go over the VAT registration threshold on 30 June 2022 (as your VATable supplies for the period 1 July 2021 to 30 June 2022 exceeds £85,000):

  • You will need to notify HMRC by 30 July 2022 and;
  • Will be VAT registered on 1 August 2022.

If you do not register with HMRC in time there are penalties.

If you breach the VAT registration threshold and can prove to HMRC that this was a singular occurrence (for example due to a one-off contract in that year which will not be repeated), you can apply to deregister for VAT. If you feel this may apply, do discuss with your accountant/tax adviser asap after you exceed the VAT registration threshold (do not just ignore it) as you are still subject to the above time limits to register for VAT and HMRC have to be satisfied that you meet the conditions to deregister (it is up to HMRC discretion).

MTD (Making Tax Digital)

If you become VAT registered, please note you will also need to follow the requirement for MTD. Please click here for more information on MTD.

If you have any queries and would like to discuss further, do contact your normal M+A Partners contact or Mary-Anne Sargeant on 07917 530018 or email mary-anne.sargeant@mapartners.co.uk.

Written by

Mary-Anne Sargeant

Mary-Anne Sargeant has been the Partner of our Attleborough office since 2010. Mary-Anne and her team provide professional accountancy and tax advice for a broad spectrum of clients, from brand new start-ups to well established family and owner managed businesses and from private individuals to companies.

Find out more about our Attleborough office here.