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New business and VAT threshold of 85000

Do you have to register before you reach 85,000 if you know you will get to 85,000 in first 12 month

My client has just started his consultancy business and expects to charge 12,000 a month in fees. So he will reach the VAT threshold in about 7 months.

He is concerned that if he doesn't register now then he may have to pay VAT on his sales for the first 7 months when he does finally register. I have assured him that he does not need to register until his fees cumulatively reach 85,000 and he will only have to pay VAT on fees generated after he registers for VAT.

I did read a comment somewhere that if you know you will exceed the threshold in the next 12 months you should register now but I'm sure thats wrong. Reading HMRCs website it seems to say if you expect to do over 85,000 in a single 30 day period you should register other wise its when you reach 85,000 in any cumulative 12 month period.

So I'm 99% confident that the client does not need to worry about registering for a few months yet but just wanted that final 1% re-assurance!

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By Matrix
18th Jun 2018 19:38

You are correct. Could he benefit from voluntary registration though?

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18th Jun 2018 21:31

Probably no need to voluntarily register .. most of his expenses are travel so not much opportunity for VAT input tax reclaim.

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19th Jun 2018 08:16

Being VAT registered can also help business credibility. May not be an issue for your client but not being VAT registered informs customers that turnover is <£85k

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19th Jun 2018 09:19

And given his work, presumably all his clients will be VAT registered, so no effect on his business.

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