VAT Registration

VAT Registration

Didn't find your answer?

Hi our company went over vat registration limit by 40k. company operating for about 10 month now we have accountants doing payroll cis tax etc but they never talked about us needing to register for vat as we are reaching limit. I know I know we have to be responsible as well but how could they not spot it if wages we have payed to subcontractors amounting to 77k. 

Can anyone please explain me what consequences will be for  late registration.

Thanks

Replies (17)

Please login or register to join the discussion.

By johngroganjga
22nd Oct 2014 10:07

Why don't you ask your accountants?

Thanks (0)
avatar
By asdute
22nd Oct 2014 10:13

Simply because they might give me wrong information as they gave me about dividends they explained me that dividends are charged at normal salary rate like 20% then 40% and so on.

I just need second opinion so they can not  mislead me.

 

Thanks (0)
By johngroganjga
22nd Oct 2014 10:17

It sounds like you need new accountants then.

Thanks (2)
avatar
By asdute
22nd Oct 2014 10:24

I know I do. Am I wrong thinking that they should have noticed it as they are doing payroll every month?

 

Thanks (0)
By johngroganjga
22nd Oct 2014 10:35

If they are only doing payroll how do you expect them to know that you haven't registered for VAT?

Thanks (0)
Euan's picture
By Euan MacLennan
22nd Oct 2014 10:40

Hold on

asdute wrote:

company operating for about 10 month now we have accountants doing payroll cis tax etc

If you have only engaged the "accountants" to do payroll and CIS, what is your gripe?  We do payroll and CIS for a lot of clients of another accountant, but we have no idea about their turnover and it would not occur to us to alert the other accountant if his clients' CIS payments had exceeded the VAT registration limit of £81,000 in the last 12 months.  If you have only been operating as a company for 10 months, no statutory accounts would have been prepared and it sounds as if you have not asked the accountants to prepare regular management accounts or indeed, to give you any business advice.

Have the accountants given you an engagement letter setting out the terms under which they will act as your accountants?  Does it say anything about VAT?

You and you alone are legally responsible for your failure to register for VAT whether or not you have asked for or received advice.

Thanks (1)
avatar
By Taxhurts
22nd Oct 2014 10:48

Agree with all of the above comments

However, whenever I do any work for a client, I would also have a think and make sure they were aware of everything, surely that's just good client service, and from MY business perspective, potentially more fees?  Especially with a new business who may not be aware of everything, how hard is it to say "are you aware of the VAT registration threshold?"

 

 

Thanks (1)
avatar
By Chipette
22nd Oct 2014 10:54

Late registration penalty

Am I right to believe that the penalty for late registration can be reduced to nil if the error is non-deliberate and notified to HMRC within 12 months? 

Thanks (0)
avatar
By asdute
22nd Oct 2014 11:02

I understand that I am responsible  for that. we do have engagement letter it says

Company formation

Bookkeeping services

Computing and filing accounts with HMRC and companies House

Computing corporation tax liability filing with ct return with hmrc

To compute and  file P11D

Liaise with HMRC and CH on behalf of your company

 

So what would be consequences for us?

Thanks (0)
Replying to Tax Dragon:
By johngroganjga
22nd Oct 2014 12:12

Scope of services

asdute wrote:

I understand that I am responsible  for that. we do have engagement letter it says

Company formation

Bookkeeping services

Computing and filing accounts with HMRC and companies House

Computing corporation tax liability filing with ct return with hmrc

To compute and  file P11D

Liaise with HMRC and CH on behalf of your company

 

So what would be consequences for us?

At the outset you only mentioned payroll and CIS work, and a number of the above comments, including mine, were made on the basis that that was what they did.

So let's start again.

Your extract from the engagement letter is odd in two ways.  Firstly it does not mention the only services you originally mentioned them doing, so they already seem to be working outside the scope of their own engagement letter.  Secondly it lists all sorts of other service that you did not previously mention.

As you seem to be keen to find someone else to blame for your late registration, can you explain where the accountants are up to with the book-keeping?

 

Thanks (0)
avatar
By Taxhurts
22nd Oct 2014 11:38

Let HMRC know ASAP

I recently had a new client who should have registered for VAT 18months previously and owed 22k.  I rang HMRC and let them know, explained why they hadn't and that it was a genuine error.  HMRC decided no penalty was required, so all they had to do was submit the VAT return and pay the VAT they should have been paying for the last 18 months.  They even agreed to an extension on paying it - HMRC are not always ogres ;-)

Asdute - firstly, ring HMRC and tell them - better you tell them than they find out.

Secondly work out what VAT you should have paid to them over the period from when you should have been VAT registered. (get an accountant to help if you are not confident in doing this).  Perhaps choose October as your VAT period end, that gives you a bit longer to get all of the info together before you need to submit and pay the VAT (would give you until 7th December).

Open and honest with HMRC is the best policy!

 

Thanks (0)
Euan's picture
By Euan MacLennan
22nd Oct 2014 11:46

Consequences

First, you must work out at which month-end your turnover to date exceeded £81,000.  You must then register from the 1st of the second month after that month-end.  So, if your turnover exceeded the threshold on (say) 31st May, you would need to be registered from 1st July.

The main "penalty" is that you will have to pay over any VAT due on your sales since your date of registration - (say) 1st July.  Assuming that the work was not the construction of new dwellings, which would be zero-rated for VAT, you have two choices.  If you can persuade your customers to pay the VAT on your sales since (say) 1st July, you can either cancel the non-vat invoices and re-issue the invoices with VAT added or you can issue VAT-only invoices - if so, it would cost you nothing.  If the customers are not VAT-registered and would refuse to pay any late VAT, you can calculate the output VAT due as if your original sales invoice included VAT - 16.67% of the price charged, rather than 20%.  You can also claim back the input VAT charged to you on your purchases since (say) 1st July to set against the liability.

Alternatively, you could apply for the Flat Rate Scheme to apply from the date of registration.  If materials amount to more than 10% of your sales, the rate is 9.5% of your gross sales - if you are effectively a labour-only contractor, the rate is 14.5%.  However, you cannot recalim input VAT on purchases under the FRS.

As to penalties, provided that you apply for registration immediately, the maximum would be 30% of the VAT due from the due date of registration to when you notify HMRC, but might well be reduced to zero.

 

Thanks (0)
By petersaxton
22nd Oct 2014 11:48

VAT never mentioned?

Was VAT never mentioned in discussions?

When I get a new client - especially one who has just started in business - I will discuss the VAT situation.

The new HMRC website doesn't seem to mention penalties for late registration for VAT. I'm sure the old website did.

I think the first thing you should do is register for VAT.

https://www.gov.uk/vat-registration/overview

 

Thanks (0)
avatar
By DMGbus
22nd Oct 2014 13:31

Engagement letter "get out"

I suppose the absence of any reference to providing advice about VAT could be a legal "get out of jail free" card for the advisors in this case. 

Morally / as best practice I expect that most accountants would however agree that:

At the initial meeting VAT registration limits / obligations would be mentioned by the advisor (just as PAYE / CIS obligations would be mentioned)A pro-active advisor would notice from ongoing bookkeeping, payroll or CIS operation that an issue with VAT registration could be emerging

 

Thanks (1)
Replying to sparkler:
By johngroganjga
22nd Oct 2014 13:35

Agree / disagree

DMGbus wrote:

A pro-active advisor would notice from ongoing bookkeeping, payroll or CIS operation that an issue with VAT registration could be emerging

Agree re book-keeping - hence my question about whether accountants had done any and where they were up to.

Do not agree re payroll - no access to any accounting records to show turnover etc. 

 

Thanks (0)
avatar
By DMGbus
22nd Oct 2014 13:50

Payroll / CIS bureau

An ordinary specialist payroll / CIS bureau I would NOT expect to recognise or advise on VAT registration issues as that's not an area of expertise I would expect to find from such a narrow-knowledge  / specialist providor.

However, if the payroll advisor is a firm of accountants and sees wages/CIS payments exceeding ( only just beow ) the VAT reg'n limit then I'd be looking for some pro-active advice being provided if they dealt with more than just payroll / CIS for the client concerned, eg.. were appointed for other tax compliance matters such as CT and the annual accountss preparation.

Thanks (0)
By petersaxton
22nd Oct 2014 15:53

We never know what has been discussed

I'm wanting to update my website and include an information section.

I will arrange a meeting soon after taking on a new client (and current clients!) and run through some checklists. I would then summarise the meeting and link to the information section relating to each particular subject.

As it is now I rely on meetings which can lead to problems later.

Thanks (0)