Exception from VAT registration - late

Exception from VAT registration - late

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Help, please!

New client company should have registered for VAT in early July 2013 because a single one-off sale (£135,000) exceeded the registration threshold.  I believe the 30 day look forward rule applies.  Registration is now almost 9 months late.

Turnover in the preceding 12 months is £22k, and in June 2013 would be expected to be no more but in fact looks likely to be around £15k.  Is exception restricted to the rolling 12-month test? Or has anyone had success with an application for exception under similar circumstances?

I've been pouring over the VAT notices; pretty sure the margin scheme scheme can be used as supplier used the margin scheme (retrospectively?)

Ignorance is no defence, but client thought invoicing a US address meant sale was outside scope of VAT.  The delivery was in the UK.

Do we get on and register urgently within 9 months to attract the lowest 5% penalty or send an application for exception and wait it out?

Replies (6)

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chips_at_mattersey
By Les Howard
25th Mar 2014 15:11

Late registration for VAT

Register urgently, and go for a low/zero penalty.

The reports of Appeals against late registrations in such cases is not hopeful. HMRC and the Tribunal tend to look at the position on the day the large order was received, and consider the taxpayer's state of mind, and legal duty, at that time. The subsequent fall in turnover cannot help him.

Do, of course, apply for deregistration if that is appropriate.

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By rjoconnor81
25th Mar 2014 15:58

.

Re-read OP - not relevant

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RLI
By lionofludesch
25th Mar 2014 16:24

Do the lot

I'd apply for deregistration and exception now.  With a bit of luck, they'll be sympathetic - especially if the trader is nowhere near the threshold apart from the exceptional transaction.

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By JimH
25th Mar 2014 17:21

The bad and the good news - maybe?

Thank you all.  You might be intrigued by this glimmer of light:

The bad news:

Exception cannot apply to the look forward VATA 1994 sched 1 sub para 3 does not apply to the 30 day look forward rule at S 1(b).

The good news:

But it may be possible to argue that a one-off item, out of character with client business, does not constitute business activity. Rainheath Ltd VBNB72600

 

 

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By Cloudcounter
25th Mar 2014 22:20

You stand a good chance

of getting HMRC to agree that the company did not need to register because at the normal date for registration there were good grounds to say that turnover would not exceed the deregistration limit in the next 12 months.

The key part of that is that is was known at the date that they should have registered.  Other cases where the turnover just happened to fall would not qualify for this exemption in retrospect.

We had a case similar to the OP a few years back and they accepted that registration could be waived.

 

 

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Replying to JaneyM50:
By JimH
26th Mar 2014 10:25

@fawltybasil2575 and fellow respondents

fawltybasil2575 wrote:

There are several aspects which require further consideration, including :-

(1) Concessionary "backdating" of deregistration,

(2) Whether the customer of the large order is VAT-registered ( and,albeit substantially less important, whether the other customers are also), 

(3) VAT Flat-Rate scheme,

(4) The nature of the goods supplied ( you must know this, JimH, so I am intrigued as to why you  think Rainheath might be a saviour).

Further, and immediate, thorough studies needed of the predicament !

Basil.

 

Basil, your whole piece is comprehensive as ever.  Thank you!  And considering your suggestions:

(1) Excellent; will try

(2) Absolutely; Client thought customer based outside EU but has no evidence of goods being exported from UK.  Unfortunately, the company will not be able to recover any resulting VAT on the large transaction.  Other clients are B2B for services, typically UK and EU

(3) Good point but think flat-rate is a non-starter (a) eligibility £150k turnover limit and (b) margin scheme has considerably lower VAT cost

(4) Hmmm - I'm going to try the registration unit in Wolverhampton as the VAT helpline has not helped (actually told me to apply for exception and sit it out) and said the structured email service will not help either

Without giving too much away, the company director's considerable experience enabled him to spot an opportunity for the company to buy a valuable item in the EU from a seller who used the margin scheme, with a buyer lined up (as principal not as agent).

It feels like business to me.  However, the director states he is not actively looking but will repeat if the opportunity presents.  The company principal activity is around consulting and event organising in the field in which such opportunities could present.  In Rainheath the secondary activity of boat chartering was not remotely related to its pig farming business.  "The small number of lettings, the limited nature of the advertising for the lets, and the company’s selectivity in accepting hirers" meant hiring out the boat to Joe public was not a business activity for VAT purposes.

If my client's one-off "deal" derived from being in the right place at the right time during a main business activity of providing services, VBNB26000 (on business and non-business activities) makes interesting reading and an avenue to follow up.

Jim

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