Share this content

Going over VAT threshold

What leaway

Didn't find your answer?

I have just discovered that Joe Bloggs' turnover got to £89k for the year to 31/8/21. For each rolling 12 months before he was below.

A check of his turnover for the year to 30/9/21 indicates £80k. August turnover was a blip, apparently, but that's what they all say.

Is there any way I can convince HMRC that he doesn't need to register for VAT?

 

Replies (23)

Please login or register to join the discussion.

chips_at_mattersey
By Les Howard
05th Oct 2021 13:49

You are obliged to notify HMRC that the client exceeded the threshold. At the same time apply for exception from registration and provide evidence that the expected turnover in the next 12 months is below £83k.

Thanks (2)
Replying to leshoward:
avatar
By Gone Sailing
19th Nov 2021 10:57

Then wait a minimum 4 months whilst getting extremely anxious whether or not you have to bill X number of clients with the extra VAT on jobs you previouly quoted on, and for which you are unlikely to be paid.

Thanks (0)
avatar
By cbp99
05th Oct 2021 13:50

To quote from an HMRC letter when we applied on behalf of a client for Exception from the requirement to register (in 2019), "we need to understand your normal trading pattern, so we can be sure your taxable turnover will be under the deregistration limit within 12 months of the month it went over the registration limit".
A questionnaire came with the letter, with space for an explanation for why the above would be satisfied, and requesting detailed monthly turnover figures for the periods before (about two years) and after the month that the threshold was reached, and requesting an explanation of the "blip".
I would think you have a good chance of persuading HMRC. The more information you provide, the better.

Thanks (1)
By Moonbeam
05th Oct 2021 14:16

Thank you both for your responses. There sounds like some hope here.

Thanks (1)
avatar
By AdamMurphy
05th Oct 2021 14:50

I think HMRC should be more lenient in relation to the current situation. For example I have a wedding photographer client and due to bookings being cancelled and now rescheduled close together, it has bunched up bookings and caused a spike and temporarily gone over the limit.

Thanks (2)
avatar
By Wanderer
05th Oct 2021 14:55

A potential problem is that without exception the client becomes liable to charge VAT from 01/10/2021.

What happens if HMRC take months to respond / reach a conclusion & exception not allowed?

If Joe deals with non VAT registered customers it will be next to impossible for him to go back to them & prise the VAT out of them.

Thanks (0)
Replying to Wanderer:
By Moonbeam
05th Oct 2021 15:08

Good point. Joe's clients are 99% home owners.

Thanks (0)
Replying to Wanderer:
Jason Croke
By Jason Croke
05th Oct 2021 15:15

I've got this exact issue, have done the registration/exception from registration and so assume we'll get that but in the meantime, client is still selling and presuming they don't have to factor in VAT. if HMRC then turn around and say "no, we do not allow exception from registration", my client is stuffed. Application was submitted in June, HMRC have said they have a 5 month backlog for Liable/No Longer Liable queries. Ridiculous.

I know, from experience, that HMRC rarely reject a request for exception unless the numbers are stupidly huge, but until we get a response from HMRC, the client is on tenterhooks and no amount of me convincing them will change that feeling.

Thanks (3)
Replying to Jason Croke:
By Moonbeam
05th Oct 2021 16:53

Thank you for being so clear, Jason. I don't know whether my own client will be able to stand the wait, but clearly there is no alternative.

Thanks (0)
avatar
By fawltybasil2575
05th Oct 2021 17:00

@ Moonbeam (OP).

From your comment (in your opening question) of “that’s what they all say”, you appear to have some doubts as to the reliability of the client’s assertion re the exceptional increased turnover in August 2021. On the basis however of your figures for the respective cumulative figures for the 12 months to 31 August 2021 and 30 September 2021, I would surmise that the August 2021 figure was at or around £15,000.

If such be the case and if, from preparing the monthly turnover figures to which I refer below, it is clear that the client is correct in his assertion, then, to hopefully reassure you, if ever a case was "nearly a cert" for exception from registration, it is your client’s case.

As has been recommended above, take a proactive line by notifying HMRC as soon as possible (since the application should really have been submitted already) of the fully detailed facts. In that regard I would submit a monthly analysis of taxable outputs figures for (say) September 2019 to 31 December 2022 (the figures for October 2021 to December 2022 being of course necessary estimates). Strictly, it is what the expected taxable turnover was expected as at 30 September 2021 which is the key, but if the application is submitted now, then the few days delay will not matter. The letter should indicate the SPECIFIC reason the upsurge in August 2021.

Include, in the letter, an explanation for the “exceptionally high” August 2021 figure. Request a response “within the next 10 days” (albeit you will almost certainly not receive one) and follow up with reminders at two-weekly intervals: on the second reminder, advise HMRC that you will assume their acceptance of the deregistration if you do not hear from them within 7 days (you will very probably not receive that acceptance, but it illustrates your firmness of opinion; and the series of letters should avoid any later disingenuous claims by HMRC not to have received the letters).

As a general comment, and whilst Covid-19 has adversely affected many organisations substantially (and HMRC may have been so affected more than most) HMRC had an obligation to PRIORITISE different types of incoming mail; but have failed to effect that priority requirement. As Jason says, that failure to prioritise such applications can cause great inconvenience and anxiety.

In the exceedingly unlikely event that HMRC seek to disallow your application, request a review and, if this fails, submit an appeal (S.83 VAT Act 1994) (I would be amazed, in the unlikely event that HMRC did not back down before the FTT hearing, if the FTT did not agree the exception from registration application).

The expected taxable turnover figure for the 12 months from 1 October 2021 is of course required to be below the deregistration figure of £83,000, not the registration figure of £85,000 (hence hopefully that figure will be MATERIALLY below £83,000 on the schedule enclosed with the application letter).

Feel free to report back with Turnover figures, so that I can advise more assuredly on whether I consider the application will be successful.

Basil.

Thanks (8)
By Moonbeam
05th Oct 2021 17:26

What excellent responses! Thanks all of you.

I shall saddle up my charger and venture forth with renewed courage and vigour.

Joe Bloggs may have to be rendered comatose for 5 months if he is to survive the ordeal, but I am sure it will all be worth it.

Thanks (1)
avatar
By doubletrouble
05th Oct 2021 17:27

Had the same thing, applied to HMRC for an exception in January 2021 and have still not received a reply!

Thanks (3)
avatar
By Michele Harris
06th Oct 2021 10:27

I notice a few people have mentioned the time it takes. I spoke to HMRC about this issue yesterday and I was advised to get in touch with them once the application was 6 months old (mine's only 5) so do not expect a speedy responce.

Thanks (2)
avatar
By heatherdavid
06th Oct 2021 10:56

We have had two cases recently where it took HMRC six months to process deregistrations, and we were told a couple of weeks ago that they were working on a 120 working day turnaround for option to tax queries (not helpful when you are trying to sell a property!). Good luck getting a response!

Thanks (2)
Ivor Windybottom
By Ivor Windybottom
06th Oct 2021 12:56

Does anyone know if the Covid fatalities have affected HMRC staff more than the general population?

It seems that their service has been more affected than anyone!

If only it was possible to do routine office work from home, or even answer the telephone from somewhere other than HMRC buildings!

I just hope their gold-plated pensions are unaffected by this lack of work...

Thanks (1)
avatar
By CardiffAccountant
06th Oct 2021 23:31

Applied to deregulate a client in March 2021.

Received confirmation in August - back-dated to March.

HMRC said that client should alter all sales invoices i.e. remove the VAT element and refund the cash!

Not a happy client.

Thanks (1)
Replying to CardiffAccountant:
avatar
By Hugo Fair
06th Oct 2021 23:48

Obviously unhappy at effort involved (in altering all sales invoices and refunding the cash to each client), but presumably will get back the same amount from HMRC (some time)?

Thanks (1)
Replying to Hugo Fair:
avatar
By doubletrouble
07th Oct 2021 11:09

But what about the clients who have claimed the input VAT on these invoices on their own VAT returns?

Thanks (0)
Replying to doubletrouble:
avatar
By Hugo Fair
07th Oct 2021 12:50

Assuming you mean the OP's client's clients ("who have claimed the input VAT on these invoices on their own VAT returns") ... they too will have an admin headache (albeit much smaller than OP's client), but won't be out of pocket after adjusting their next VAT return because they'll have received the refund from OP's client?

The circularity of the cash trail within the VAT system never ceases to amaze me!

Oh, and any of OP's client's clients who weren't VAT registered will be laughing all the way to the bank as they accept the reimbursement of VAT (if OP's client is unable to determine which of it's clients were VAT registered at time of original invoice).

Thanks (1)
Replying to doubletrouble:
avatar
By CardiffAccountant
07th Oct 2021 14:40

Fortunately, he's a builder and the end client being public - not registered.

Thanks (0)
Replying to Hugo Fair:
avatar
By CardiffAccountant
07th Oct 2021 14:39

Hardly anything claimed from HMRC. VAT was claimed at an earlier date. Builder is not happy.

Thanks (0)
avatar
By Gone Sailing
19th Nov 2021 11:18

Two temporary solutions:

1. HMRC gives accountants, who have VAT agency, the discretion to exempt, not apply formally for exemption, but tell HMRC that the exemption has been allowed informally.

2. HMRC accepts their culpability in the delay, and when appropriate, sets the registration date as the next first of the month after they get around to it.

Thanks (0)
Share this content