How to Calculate £90k VAT Taxable Turnover

Gov.uk site contains conflicting methods

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At https://www.gov.uk/register-for-vat we're informed that:

"You must register if, by the end of any month, your total VAT taxable turnover for the last 12 months was over £90,000"

The words "by the end of any month" implies that the 12 month rolling total for VAT taxable turnover should be calculated MONTHLY ie at the last day of each calendar month.

However, the illustrative example uses a DAILY 12 month rolling total:

"Between 10 July 2019 and 9 July 2020 your VAT taxable turnover is £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August 2020."

Which is correct please, a monthly 12 month rolling total or a daily 12 month rolling total? 

Replies (28)

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VAT
By Jason Croke
25th Apr 2024 11:16

It is done at the end of each month. Not daily.

The example is a little unhelpful, I think they are trying to explain it but in a different way to their explanation in the paragraph above it...also, you did not paste the full wording of that website :

"Between 10 July 2019 and 9 July 2020 your VAT taxable turnover is £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August 2020. Your effective date of registration is 1 September 2020."

If we take the above literally, assuming we are looking at turnover on a daily basis, the business goes over on 9th July, it then must register for VAT before 30th August and the effective date of registration will be 01 September.

If we take the above and simplify it by just looking at the end of month turnover....turnover at 9th July was £100,000 and lets assume by the time we get to the 31st July the turnover is now £150,000 but nothing has changed, business still has to notify by 30th August and registered from 01 September.

Or put another way, at the end of the month where the threshold is breached (July), client gets one month free/no requirement to declare VAT on sales and then is registered from 01st September.

All roads lead to the same outcome, which is 01st September, but I agree to a casual observer the wording in the guidance is a little contradictory.

HMRC internal guidance here which I think is slightly better than the guidance in your link.
https://www.gov.uk/hmrc-internal-manuals/vat-registration-manual/vatreg2...

https://www.gov.uk/hmrc-internal-manuals/vat-registration-manual/vatreg2....

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Replying to Jason Croke:
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By I'msorryIhaven'taclue
25th Apr 2024 14:46

Jason Croke wrote:

It is done at the end of each month. Not daily.

Thanks Jason, that's the way I've always calculated it and it's reassuring to know I'm not out of step with everyone else.

Jason Croke wrote:

"Between 10 July 2019 and 9 July 2020 your VAT taxable turnover is £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August 2020. Your effective date of registration is 1 September 2020."

Our client applied the HMRC example for his company, incorporated 15th March 2023, viz:

"Between 15 March 2023 and 14 March 2024 your VAT taxable turnover is £85,500. That’s the first time it has gone over the VAT threshold. You must register..."

Except that our client doesn't need to register, because his t/o from 15th - 31st March 2023 was £4k and for 15th -31st March 2024 just £2k. Which means his 12 month rolling total to 31st March 2024 was £83,500

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Replying to Jason Croke:
RLI
By lionofludesch
25th Apr 2024 18:01

Jason Croke wrote:

It is done at the end of each month. Not daily.

The example is a little unhelpful, I think they are trying to explain it but in a different way to their explanation in the paragraph above it...also, you did not paste the full wording of that website :

"Between 10 July 2019 and 9 July 2020 your VAT taxable turnover is £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August 2020. Your effective date of registration is 1 September 2020."

If we take the above literally, assuming we are looking at turnover on a daily basis, the business goes over on 9th July, it then must register for VAT before 30th August and the effective date of registration will be 01 September.

If we take the above and simplify it by just looking at the end of month turnover....turnover at 9th July was £100,000 and lets assume by the time we get to the 31st July the turnover is now £150,000 but nothing has changed, business still has to notify by 30th August and registered from 01 September.

Or put another way, at the end of the month where the threshold is breached (July), client gets one month free/no requirement to declare VAT on sales and then is registered from 01st September.

All roads lead to the same outcome, which is 01st September, but I agree to a casual observer the wording in the guidance is a little contradictory.

HMRC internal guidance here which I think is slightly better than the guidance in your link.
https://www.gov.uk/hmrc-internal-manuals/vat-registration-manual/vatreg2...

https://www.gov.uk/hmrc-internal-manuals/vat-registration-manual/vatreg2....

I'm not sure it does come to the same outcome. What if he takes £91000 between 10 July 2023 and 9 July 2024 but then goes on holiday and in the year to 31 July 2024 only takes £89000?

Should be register ? I vote no.

It's a shocking example.

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Replying to lionofludesch:
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By I'msorryIhaven'taclue
25th Apr 2024 21:38

I think we're singin' from the same hymnbook here. The client company in my case applied the "letter-of-the-law" HMRC example with all of its mid-year connotations, and mid-March 2024 came out marginally above the (as was then, until 31st March '24) magic £85k threshold.

Come the end of March 2024 his 12 month t/o was below that same £85k threshold - not because he'd been on his hols in March (and why the Dickens would any sensible person do that!), but simply because his t/o for the latter half of March 2024 was way way below his t/o for the latter half of March 2023.

Are we on the same page with this, Lion? The HMRC example is at kindest misleading!

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Replying to I'msorryIhaven'taclue:
RLI
By lionofludesch
25th Apr 2024 21:54

I'msorryIhaven'taclue wrote:

I think we're singin' from the same hymnbook here. The client company in my case applied the "letter-of-the-law" HMRC example with all of its mid-year connotations, and mid-March 2024 came out marginally above the (as was then, until 31st March '24) magic £85k threshold.

Come the end of March 2024 his 12 month t/o was below that same £85k threshold - not because he'd been on his hols in March (and why the Dickens would any sensible person do that!), but simply because his t/o for the latter half of March 2024 was way way below his t/o for the latter half of March 2023.

Are we on the same page with this, Lion? The HMRC example is at kindest misleading!

There's a lot of guesswork in there.

I prefer the HMRC [***] up theory.

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Replying to lionofludesch:
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By I'msorryIhaven'taclue
25th Apr 2024 22:42

Ha! Well I can roll with that... who writes this f*ckwit stuff! (I'm allowed a an exclamation mark here, as it's a rhetorical exclamation. Just saying).

We're on a similar tack, because each of our example cases (as a matter of fact a real case for yours truly, although I tweaked the figures for clarity's sake) carry the same parameters: mid-year the threshold is exceeded; come the end of the month we're back to below the registration threshold.

I see you have a plum fixture on the cards in the next few weeks: Wakefield Trinity have a special place in us Southerners' hearts on account of Don Fox. I still cannot believe he missed! In the south-west vernacular, that guy couldn't hit a cow's a*rse with a shovel! I wonder if he ever got over it.

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Replying to I'msorryIhaven'taclue:
RLI
By lionofludesch
25th Apr 2024 23:07

I'msorryIhaven'taclue wrote:

Ha! Well I can roll with that... who writes this f*ckwit stuff! (I'm allowed a an exclamation mark here, as it's a rhetorical exclamation. Just saying).

We're on a similar tack, because each of our example cases (as a matter of fact a real case for yours truly, although I tweaked the figures for clarity's sake) carry the same parameters: mid-year the threshold is exceeded; come the end of the month we're back to below the registration threshold.

I see you have a plum fixture on the cards in the next few weeks: Wakefield Trinity have a special place in us Southerners' hearts on account of Don Fox. I still cannot believe he missed! In the south-west vernacular, that guy couldn't hit a cow's a*rse with a shovel! I wonder if he ever got over it.

No, he didn't. Great player too. Very sad that that's what he's remembered for.

This year however, the game will see the return of our first ever signing, Daryl Powell, who is now coaching Trinity. Also part of a very famous Eagles halfback partnership with our current coach, Mark Aston. Daryl v Tubbs games are always an event. Very much looking forward to the game.

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Replying to I'msorryIhaven'taclue:
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By rmillaree
26th Apr 2024 09:54

i do no from a practical point of view when the vat office drill to the detail i have only ever seen them to ask for digures on calnedar month basis - there forms are prepped for that - i have never seen them have any mention or reference to part months. Having done quite alot of close calls over the years where we/they have had to manually trawl through the figures - i think if they had been able to drill to part month i might have had a query or too. So from practical persepective it has never ben an issued - note i must admit i have not ever flagged up they would have been over had it been for 12 month period to "mid month" - in that regard it probably makes sense to not even look at or ask the question of the vat office ! - i would say the wording seems ok but i can see why some might say well a month is simply any period of 30 days.
Great question here op !

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By taxdigital
25th Apr 2024 11:18

This is the law:

"a person who makes taxable supplies but is not registered under this Act becomes liable to be registered under this Schedule—(a) at the end of any month, if the person is UK-established and the value of his taxable supplies in the period of ONE YEAR then ending has exceeded £90,000"...... (Para 1, Sch 1, VATA).

So, if you're calculating as of 30 April 2024 and if the taxable supplies have exceeded £90,000 during the year 01 May 2023 to 30 April 2024 the client will need to register for VAT.

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Replying to taxdigital:
DougScott
By Dougscott
25th Apr 2024 11:21

[quote=taxdigital]

This is the law:

The law is always much better than HMRC's attempts to interpret the law.

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Replying to taxdigital:
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By I'msorryIhaven'taclue
25th Apr 2024 14:55

Thanks Taxdigital, I see it clearly states "at the end of any month...." and then sets the period at one year then ending.

"Then ending".... "at the end of any month". Not ending in the middle of a month, as per the Revenue's misleading example. Who writes this stuff!

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Replying to I'msorryIhaven'taclue:
By Duggimon
25th Apr 2024 15:32

15 March to 14 April is a month and the end of that month is 14 April, it doesn't say in the law that the "end of the month means the calendar end!

Just throwing the cat among the pigeons here for a bit of a laugh though, I've never done it any way other than the calendar end and I'd be quite comfortable digging my heels in and having a fight with HMRC about it.

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By I'msorryIhaven'taclue
25th Apr 2024 22:15

Aww heck... screw it! Just when I imagined I'd read the room correctly along comes the seed of doubt that is the dissenting voice!

But good for you Duggimon for playin' Devil's advocate on this matter. That's what A-web is all about - alternate views. Think tank, even.

Where was I? Oh, that's right... does the end of the month mean the end of any given calendar month? Or could it mean the end of some alternative month: the lunar cycle, perhaps; or the monthly menstrual cycle even?

[Legal] Interpretation required here - anyone up for that? The legislation does allude to the end of a [given] month; so answers on a postcard please, no copying and no cribbing!

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By rmillaree
25th Apr 2024 12:26

unbelievable that it clearly says monthly calc per legislation copied below and then the vat office manage to include two july months in what is 12 calendar month calculations - you could not make it up.

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By rmillaree
25th Apr 2024 12:26

unbelievable that it clearly says monthly calc per legislation copied below and then the vat office manage to include two july months in what is 12 calendar month calculations - you could not make it up.

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Replying to rmillaree:
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By I'msorryIhaven'taclue
25th Apr 2024 14:59

Two partial July months.... and if you believe HMRC's example you'd need to calculate your rolling total every day!!

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By fawltybasil2575
26th Apr 2024 00:00

The redoubtable Duggimon's "daily" theory [whether serious or tongue in cheek:)] is the same as the theory which is espoused at the end of (say) a "decade" or "century": that theory can of course be "argued either way".

However, the example in the guidance of:-

"Between 10 July 2019 and 9 July 2020 your VAT taxable turnover is £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August 2020";

is incorrect, quite regardless of whether one accepts the "daily" theory. The reason of course is that, if the "daily" theory were valid then, under Para 5(1) of Schedule 1 of VAT Act 1994, the 30 days time limit for notifying HMRC of the VAT registration limit's having been exceeded would be 8 August 2020 (NOT 30 August 2020 as stated in the above example !).

The reality is thus that the legislation at least impliedly imputes "calendar" before "month", in all respects.

In days of yore, if one were to advise someone of authority within HMRC that the guidance was, as it palpably is, a "nonsense", then one would expect to see its being rectified; sadly such days are long gone: the best one can expect is a claim that HMRC have "other priorities".

As other eminent contributors have said, and as a statement of fact, quoting turnover figures for part months, and trying to draw conclusions therefrom in relation to determining the date from which is required to be registered, is a fundamentally flawed approach.

The legislation is here:-

https://www.legislation.gov.uk/ukpga/1994/23/schedule/1

See Para 1(1)(a) [for the registration requirement] and Para 5 (1) [for my point above (second paragraph)].

Basil.

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Replying to fawltybasil2575:
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By lionofludesch
26th Apr 2024 00:03

You should probably be looking at the Interpretation Act, Basil.

Sch 1. Month means calendar month.

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By FactChecker
26th Apr 2024 00:52

... but only since 1850.
Now when I were a lad ...

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By rmillaree
26th Apr 2024 09:57

ahaaa - is it as simple as that ? - champion if that is the case

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By lionofludesch
26th Apr 2024 11:30

rmillaree wrote:

ahaaa - is it as simple as that ? - champion if that is the case

It is. An act often overlooked.

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Replying to lionofludesch:
By SteveHa
26th Apr 2024 13:04

I often cite S7 IA, but have never even looked at the rest. Perhaps I should.

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By lionofludesch
26th Apr 2024 13:14

SteveHa wrote:

I often cite S7 IA, but have never even looked at the rest. Perhaps I should.

It's useful to have an idea of what's in there. You don't need to learn it by heart.

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By I'msorryIhaven'taclue
26th Apr 2024 15:12

Revisiting the Revenue's gov.uk example:
"Between 10 July 2019 and 9 July 2020 your VAT taxable turnover is £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August 2020. Your effective date of registration is 1 September 2020."

There's no "must register" about it. That dogma is pants. Let's suppose that £100k t/o comprised of:

1st July 2019 to 9th July 2019 £nil
1oth July 2019 to 31st July 2019 £16k
1st Aug 2019 to 30th June 2020 £68k
1st July 2020 to 9th July 2020 £16k
10th July 2020 to 31st July 2020 £nil

As per the Revenue's example, t/o 10th July 2019 to 9th July 2020 is £100k
t/o for the 12 months ended 30th June 2020 is £84k
t/o for the 12 months ended 31st July 2020 is £84k

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By Yorkshireblue
29th Apr 2024 10:50

If a non VAT registered trader has a good end of year and his final month in a rolling 12 months takes him over say £100k and he knows that from month 13 onwards he will drop to below £75k'ish, does he still need to register ?

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By Homeworker
29th Apr 2024 11:01

HMRC say that "You can apply for a registration ‘exception’ if your taxable turnover goes over the threshold temporarily".
I have successfully applied for this in the past where I had a client with an exceptional sale. Mind you it was done several months later (when I found out about it), when I had the figures available for past and subsequent months to show it was out of the norm.

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By rmillaree
29th Apr 2024 11:09

you are missing the point here Yorkshireblue.

for vat registration purposes there is no year end - there are monthly calculations and obligations that need doing every month ref these checks - the accounts year end is irrelevent. To be clear here teh lock never resets and its always latest 12 months sale sthat matter !!

If we take the unlikely scenario though whereby they have been below on the rolling 12 month test necessary every month up to the end of year minus one month - but exceed the threshold on the last month - then there is the possibility to avoid registration if its expected the next 12 months will drop below the threshold - thats a technical area where full chapter and verse info needs to be supplied to vat office to satisfy them - this is complicated area that its super easy to mess up on though satisfying the vat office.

Note many people dont also realise that its posible to apply for deregistration based on next 12 months turnover being below even if latest 12 months is above - thats a different but similar availabnle option

Either way when over threshold its up to vat office to approve deregistration or exception - and that process can be fraught with difficulties - not helped by vat office taking 6 months to approve or deny requests.

https://www.gov.uk/register-for-vat

If you go over the threshold temporarily
You can apply for a registration ‘exception’ if your taxable turnover goes over the threshold temporarily.

Write to HMRC with evidence showing why you believe your VAT taxable turnover will not go over the deregistration threshold of £88,000 in the next 12 months.

HMRC will consider your exception and write to confirm if you get one. If not, they’ll register you for VAT.

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Replying to Yorkshireblue:
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By lionofludesch
29th Apr 2024 11:38

Yorkshireblue wrote:

If a non VAT registered trader has a good end of year and his final month in a rolling 12 months takes him over say £100k and he knows that from month 13 onwards he will drop to below £75k'ish, does he still need to register ?

As rmillaree says, maybe, maybe not.

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