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VAT Registration Exception (not exemption!)

VAT Registration Exception (not exemption!). Letter or Online?

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Greetings all!

I have a business (sole trader) buying and selling second-hand goods (autumn/winter outerwear) from home and have just popped over the VAT threshold this month by £500 (mid-October 2021) but did not realise until a week or so later during a holiday. I am hoping to apply for VAT registration Exception.

I had a customer who made six purchases totalling £8000 over the period of November 2020 to May 2021. This has left exceptional sales in months December 2020 and March/May 2021. My March/May 2021 turnover was double the like for like months in previous tax years!

I also had great sales in August and September this year –I suspect this will down to removal of lockdown/less uncertainty about whether they can use said purchases. August though is not a month I usually sell a lot of winterwear, nor is May for that matter!

My rolling 12-month turnover will be hovering around £83-84000 mark until end of March 2022 where it should drop below the deregistration threshold, but definitely by the end of May 2022. My average monthly turnover for the past three years (Oct 2018 to Oct 2021) is £5400. This tax year so far has averaged £6500 per month.

Would there be a good chance that HMRC will accept my exception? I do not believe I will have a single customer purchase £8000 again! Nearly all my sales are to unique customers, not so many repeats.

I am not sure whether to send a letter to HMRC or apply online. There is a box when registering for VAT online (VAT1) where you can tick Exception. I would suspect receiving a reply in the post would take a lot longer? Has anyone had experience registering for exception online?

On another note, I do expect to be getting a part time job in the new year so I do not spend every living second at home! This means I will be spending a less time working on this business.

Thank you all in advance!

Replies (3)

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By Jason Croke
29th Oct 2021 07:37

When you go over the £85k rolling threshold (compulsory threshold), you are required to apply for VAT registration, but as you noted, on the VAT registration form, there is a box to tick for "exception from registration", so you complete the VAT registration form as if you are registering but then ticking the exception box tells HMRC you are asking for exception and HMRC generally accept this and will not process your registration and write to you confirming as such.

I'd do the submission online as then you have a email confirmation from HMRC/audit trail. You can also write to HMRC but it'll take longer to get a confirmation.

The reason you have to "register" is because the law says so, plus by doing it this way - asking for exception - allows HMRC to tell the difference between those who go over the threshold and do nothing and those who are careful and monitor their turnover and ask for exception properly....otherwise nobody would ever register for VAT and then when they get caught they'd say they didn't realise, etc. Trust that makes sense.

Thanks (2)
Replying to Jason Croke:
By Yeti
01st Nov 2021 13:13

Thank you for the reply! I have written the cover letter with the appropriate invoices / forecasting figures. Unfortunately it does not look like you can apply for VAT exception online, as it just sends you back to the VAT Registration overview.

Thank you again, I will just post a letter and hope for the best!

*This comment has been moderated.*

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Replying to Yeti:
By Hugo Fair
01st Nov 2021 15:12

WARNING ... according to Google the above URL references ...
" virus is a cyberthreat that affects users on all platforms and displays intrusive content on Google Chrome or other browsers" (i.e. it is malware)!

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