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A business has approached me as they have exceeded the VAT threshold in March and not registered yet.

I was of the impression that when registering then the registration takes effect from the first day of the second month, so in this instance May 1. The VAT office however say that the registration takes effect from the March as this is when the threshold was exceeded.

Can anyone confirm that the VAT office have this correct please, as I am not convinced?
Anon

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By stephenkendrew
01st Aug 2007 13:23

they are wrong!
Look at the VAT office's leaflet number 700/1.

This makes it quite clear that if you exceed the VAT threshold in March, you need to be registered from 1 May.

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By User deleted
01st Aug 2007 13:27

You're right, HMRC are wrong
The timescale is as follows :-

Do a 12 month turnover computation to 28 Feb 07
IF below reg'n threshold (the then threshold) - no need to yet notify

Do a 12 month turnover computation to 31 Mar 07
IF above threshold - notify by 30 April 07
and be VAT registered from 1 May 2007

The above is well established and I've never seen the concept raised of being registered from (in this example) 1 March 2007 or 1 April 2007 as inferred.

The only thing I can think of is how was the VAT1 completed - was "01032007" entered on the form at either date wish to be registered or date required to be registered (latter box should have been completed "01052007").

It is also possible that because of the mis-management of the VAT registration service inadequately trained staff are now being used to deal with VAT registrations to deal with the large backlog of work created by HMRC management at the highest level. Errors will inevitably arise in such circumstances.

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By theaardvark
01st Aug 2007 14:52

2 possible reasons
There are 2 possible reasons why HMRC could be stating that March is the correct date for registration.

1) The prospective test

There are actually 2 tests for VAT registration. The first is the retrospective test that everyone knows. The second, frequently overlooked test is the prospective one.

The prospective test looks at expected income in the next 30 days alone. If you have reason to expect that your income in the next 30 days will exceed the VAT registration threshold you become registerable from the date on which that expectation is formed.

2) (not so) Voluntary early registration

If someone has submitted a registration application to HMRC requesting voluntary registration from the date in March then I'm afraid your Client is stuck with it, even if it is due to a clerical error in the completion of the registration form.


Regards,

Paul Taylor
Senior VAT Consultant
Dains

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