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Breach of VAT Registration Limit

Breach of VAT Registration Limit

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I know this may be a fairly obvious question with a fairly obvious answer but i just want to confrim my own interpretation.

Client has breached registration limit and needs to register for VAT.

However in view of the fact that client will be accounting for VAT under the cash accounting scheme when is registration limit breached on issue of invoices or receipt of payment.

I think it will be on issue of invoice but would be grateful for confimation or if disagreement the basis for this.

Thanks in advance for your input.
Gary Donald Fraser

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By 2156806
31st Aug 2007 09:02

Thank You
Thanks for all your input.

Have phoned Advice Line to 'get if from the Horses mouth'.

They have confirmed as i and others thought that the invoice issued date is the relevant date for breach of registration limit.

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Euan's picture
By Euan MacLennan
28th Aug 2007 10:33

Invoices issued, not cash received
The registration (and de-registration) limits are expressed in terms of the value of taxable supplies. Supplies are made when the goods or services are delivered or on the invoice date if within 14 days after the actual delivery. Only in the event of payment before delivery is the time of supply deemed to be the date of payment. Your client must register from the 1st of the month one month after the end of the month in which your client's invoiced turnover (excluding any exempt supplies) exceeded the registration limit in the 12 months to that date.

I am not sure about payments received after the date of registration for invoices without VAT issued before registration. It would seem unfair that VAT has to be paid on them under the cash accounting scheme. Certainly, if you start with the standard scheme based on invoice date, the payment of invoices issued before switching to cash accounting is ignored because the VAT has already been accounted under the standard scheme. I suggest you ask the VAT helpline for guidance on this point. If in doubt, start with the standard scheme and switch to cash accounting at the start of a subsequent VAT period.

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By mbuffery
28th Aug 2007 08:39

Cash received, not invoices issued.
Until a business is registered for VAT, it cannot issue valid tax invoices, consequently, the registration limit is breached when payments in excess of the limit are received. The same principle applies to the other tests for registration. Cash received between the date of effective registration and the date you receive the registartion has to be treated as VAT inclusive, with VAT invoices issued after the event.

It can be quite a difference, so I hope it helps.

Mark Buffery

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By geoffwolf
28th Aug 2007 13:27

start of cash accounting
Although the relevant limit is invoice based, cash accounting need not include VAT on invoices raised before the correct starting date even if received after that date.

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