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VAT Registration and exception again

On ther face of it client should have registered 17 months ago but is there an exception case?

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Because of a single larger than usual job my client did for his recurring client he went over the VAT threshold on a 12 month rolling basis 17 months ago. Sounds like it could be very bad news.

On a 12 month rolling basis, he continued to be over the VAT threshold for several months thereafter. However, if we calculate his turnover for the 12 months following his breach of the VAT threshold he is under the deregistration threshold. If addressed at the time I think he might have been granted an exception. Would you agree?

Does the fact that it wasn't addressed 17 months ago scupper any prospect of an exception?

Thank you kindly.

 

Replies (13)

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By bernard michael
18th Jul 2018 11:07

I'm not sure on what basis you would get an exception 17 months ago when your turnover was going over the limit on a 12 month rolling basis

HMRC notes state

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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Replying to bernard michael:
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By andy.partridge
18th Jul 2018 11:51

bernard michael wrote:

I'm not sure on what basis you would get an exception 17 months ago when your turnover was going over the limit on a 12 month rolling basis

On the basis that it was caused by a single exceptional invoice, that it was temporary and that turnover in the subsequent 12 period had not exceeded the deregistration threshold.

Basically, Bernard, you are answering my question with my question. I am aware of the guidance but unaware of how far it stretches.

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By Chipette
18th Jul 2018 11:21

I think HMRC would accept a retrospective application if some conditions are fulfilled.

From the VAT manual:

Exception from registration: retrospective applications
Schedule 1, paragraph 1(3) gives the Commissioners discretion to allow requests for retrospective exception. It is important to consider each case on the basis of reasonableness.
Example
If you receive an application for retrospective exception containing information which:
• would have been available at that time, and
• would have led you to grant exception from registration at the earlier date
then it would be reasonable to allow retrospection now.
This was confirmed by the tribunal case of Nash and Nash - MAN/96/1332 which held that only factors which are evident at the time that registration should have taken place should be taken into account.

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Replying to Chipette:
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By andy.partridge
18th Jul 2018 11:52

Thanks. I think there is a glimmer of hope there.

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JCACE
By jcace
18th Jul 2018 12:43

I have successfully argued for retrospective exception, albeit a while ago now and not 17 months after the event. My client too had an exceptionally large invoice (including a load of materials), but it was clear that without that he was safely under the threshold and would be for the foreseeable future.

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Replying to jcace:
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By andy.partridge
18th Jul 2018 13:49

Yes, I think that it is an historical request and not real time that concerns me.

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Replying to andy.partridge:
JCACE
By jcace
18th Jul 2018 14:54

In order to be successful, you will need to be able to show that the exception existed at the time, and that it is not just with the benefit of hindsight that you are making the claim. I guess the existence of a single unusually large invoice, combined with the normal level of turnover ought to be persuasive.

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By bernard michael
18th Jul 2018 15:21

Was the client aware at the time that the order was a one off or did the hope for other orders? Not sure how you can put yourself in a mind 17 months ago. If you can persuade the HMRC that was the case how do you get past the 12 month rolling turmover hurdles ?

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Replying to bernard michael:
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By andy.partridge
18th Jul 2018 15:58

If a single large invoice puts you over the VAT threshold it is 'perfectly normal' that, so long as that large invoice remains in the rolling 12 months calculation, you will exceed the threshold for some time thereafter.

The major point in favour of exception is that if you start the clock the day after that invoice the client did not exceed the deregistration threshold in the following 12 months.

Hindsight is a problem, but if the client had no intention of breaching the threshold, did the breach and subsequently didn't in the following 12 months it would seem to me (at least) that actuality is simply confirming that intention. Incidenatlly, the client has a history of trading for many years and has had no appetite to voluntarily register whilst under the threshold.

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Replying to andy.partridge:
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By bendybod
23rd Jul 2018 16:45

Yes, I can't remember where I read, but I know I did, that HMRC can't refuse an exception just because it was a long time after when it should have been notified. If anything, if the large invoice hasn't recurred in the 17 months since, that strengthens the argument that it was exceptional!
The question still remains whether it 'could' occur in the future. If there is no reason why it should and the client is not actively chasing work with a view to replicating it then I definitely would pursue it if it were my client.

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Replying to bendybod:
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By andy.partridge
23rd Jul 2018 16:51

Thanks. Job done, will just have to await the outcome for now.

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Replying to andy.partridge:
Quack
By Constantly Confused
25th Jul 2018 08:36

andy.partridge wrote:

Thanks. Job done, will just have to await the outcome for now.

Keep us posted, I'm interested in how this turns out.

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Replying to andy.partridge:
ALISK
By atleastisoundknowledgable...
25th Jul 2018 08:51

andy.partridge wrote:

... it would seem to me (at least) that actuality is simply confirming that intention.

You read my mind.

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