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VAT registeration

VAT Registeration

I have a client who has gone over the VAT threshold. They went over in March 2017. Unfortunatly I have only recently received their books and spotted the problem. My first question is what is the best thing to do? Contact HMRC and tell them when the client should have registered? because I think this could be a peak in turnover as the client had an espescally large job during one month. Provided their turnover is below the 83K for the following 12 months could they get away with not registering? 

My fear is they will have to backdate their registeration to April and end up with a huge bill or get into trouble.

 

Ive edited the question to explan my point a bit clearer. :)

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By mrme89
06th Dec 2017 12:15

I am surprised that you consider tax evasion and ignorance to be a serious solution.

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to mrme89
06th Dec 2017 12:18

I'm not sure what you mean? I am asking for advise on the subject. I am looking to do the right thing not be be deceptive.

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By mrme89
to cornwall
06th Dec 2017 12:23

Then tell them they need to register for VAT and inform HMRC the date that the business breached the VAT threshold.

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06th Dec 2017 12:28

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 won’t go over the de-registration threshold of £83,000 in the next 12 months.

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

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06th Dec 2017 12:29

What about the exception if its a one off? Which i believe it is? per HMRC website you don't have to register, but inform them of the reason and ensure your turnover for the following 12 months is below the deregistration limit (83k)

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By Ruddles
to cornwall
06th Dec 2017 12:46

But they didn't inform them of the reason and apply for exception, did they? There's probably a case out there somewhere where HMRC or a Tribunal took sympathy and allowed the trader not to register. However, as a rule, HMRC aren't interested in retrospective claims about future turnover. You might get them to agree that registration isn't required now, but still want a penalty based on the VAT underdeclared for the period during which they ought to have been registered.

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to cornwall
06th Dec 2017 17:50

cornwall wrote:

What about the exception if its a one off? Which i believe it is? per HMRC website you don't have to register, but inform them of the reason and ensure your turnover for the following 12 months is below the deregistration limit (83k)

No - you have to tell them ansd apply to be accepted.

Lots of people over thed years have been caught out by this. You cross the threshold, say nothing about it, HMRC come along, register you from 10 years and then you can only deregister from the date you apply.

Leaving you with ten years VAT to pay which you needn't have paid if only you'd piped up.

Up to you, obviously. Do nothing if you think that's a better plan.

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06th Dec 2017 12:32

You shouldn't fear they will have to backdate the VAT registration unless you are culpable. Your client, if it turns out to be bad news, won't be the first or last to have fallen into the trap of complacency and ignorance.

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to andy.partridge
06th Dec 2017 12:42

when i say i fear, I mean i am concerned for them getting into trouble. My job is to the the correct thing. I did actually have the VAT conversation with them during the year so it is their error unfortunately.

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06th Dec 2017 14:12

Be open with HMRC; explain the circumstances. As an 'unprompted' disclosure any penalty will be reduced.
If sales are B2B, can you approach customers to pay the VAT?
Make sure you have purchase invoices to claim input tax; and include input tax available under the pre-registration rule.

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06th Dec 2017 14:25

In order to give you a definitive answer, I require you please to delve further into your comments that:-

(i) "I think this could be a peak in turnover as the client had an espescally (sic) large job during one month", and

(ii) "Provided their turnover is below the 83K for the following 12 months".

Taking (ii) first, I interpret "the following 12 months" to be the 12 months from 1 April 2017.

What the client's taxable turnover TRANSPIRES to be for the 12 months to 31 March 2018 is strictly NOT relevant (but see below re a "caveat"), as this is hindsight.

The KEY is what the CLIENT, viewed not NOW but at 30 APRIL 2017, EXPECTED the taxable turnover to be for the 12 months to 30 April 2018. IF (and ONLY IF) he can show, to the satisfaction of HMRC (or ultimately if necessary at Tribunal) that, viewed I reaffirm at 30 April 2017 (the day immediately before the otherwise registration date of 1 May 2017) he expected the future taxable turnover to be below the deregistration limit, then in practice HMRC will grant formal exception from registration.

Your client (or, better, you on his behalf) should write promptly to HMRC, IF indeed your client can confirm that the position WAS as per my last paragraph above, applying retrospectively for exception from registration. Here is a link to the HMRC guidance (scroll down to "Get an exception"):-

https://www.gov.uk/vat-registration/when-to-register

The letter to HMRC should include monthly taxable turnover figures from (say) 1 January 2016 to the present date (HMRC may ask for figures earlier than January 2016), and clearly explain the reason for the "blip" in taxable turnover (and why there would be no corresponding similar blips in the 12 months to 30 April 2018).

The "caveat" to which I referred above is that whilst the ACTUAL taxable turnover figures from May 2017 onwards are strictly irrelevant, it certainly in practice helps the application if those figures do indicate an annual taxable turnover below the deregistration limit.

In summary, all hinges on what the client (at 30 April 2017) expected the taxable turnover to be in the 12 months to 30 April 2018; and providing evidence to convince HMRC that such expectation was valid. If you/your client are successful in that application, then no penalty will arise.

Basil.

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By Ruddles
to fawltybasil2575
06th Dec 2017 15:11

fawltybasil2575 wrote:
IF (and ONLY IF) he can show, to the satisfaction of HMRC (or ultimately if necessary at Tribunal) that, viewed I reaffirm at 30 April 2017 (the day immediately before the otherwise registration date of 1 May 2017) he expected the future taxable turnover to be below the deregistration limit, then in practice HMRC will grant formal exception from registration.

Your experience in practice differs from mine, then.

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06th Dec 2017 14:31

Thanks guys, some really helpful information here. I will contact HMRC with all the relevant information and go from there.

Sorry if my first question sounded a bit confusing (mrme89). This is a new situation for me so was looking for help and advise which most of you guys have done. Thank you for your help

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06th Dec 2017 14:43

Eugh!! @ "you guys".

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to Portia Nina Levin
06th Dec 2017 14:54

I know. Appalling. Should be "yous guys".

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06th Dec 2017 16:28

I registered a new pub client for VAT late by about 6 months. Backdated to when they should have been registered and calculated the tax for a nine month first period. HMRC sent a standard letter requesting details of what and when and why they were late. The clients were honest and admitted their ignorance now corrected (by me).
No penalty was issued.
It may help if your clients say (as mine did) they have now engaged an accountant and promise it won't happen again, m'lud.

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07th Dec 2017 14:46

In fully respecting the contrary views of the majority of eminent posters above, I remain extremely bullish that the OP will be successful if they can validly establish that, AS AT 30 April 2017, the client would have been able to substantiate (by way of submission to HMRC) a forecasted future taxable turnover figure of below the deregistration limit.

The OP should alert HMRC to their own internal manual, and specifically VAT19000 thereof. This advises HMRC officers to normally accept a retrospective application for exception in these very circumstances.

That guidance correctly draws attention to Sch.1, Para 1(3) VAT Act 1994.

Forgive me for currently being unable to provide links to (i) the HMRC guidance, and (ii) the legislation referred to above (googling "VATREG19000" should quickly however lead to that guidance).

At the risk of apparent immodesty, I have not "lost" any of the 5 or 6 exception application cases which I have dealt with over many years.

Basil.

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