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 (5)

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VAT
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.

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

WARNING ... according to Google the above URL references ...
"Ibb.co 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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Replying to Jason Croke:
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By Yeti
05th Dec 2022 12:24

Hello again Jason! I put an update on this thread with a few follow up questions as I have only just received a letter from HMRC! I hope not everyone has had to wait this long only to have to resubmit a form again!

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By Yeti
01st Dec 2022 12:45

*UPDATE*

I have only now received a reply from HMRC (almost 13 months on!) asking for more information regarding normal trading pattern. The form looks pretty much like a resubmission! Name, business address, describe business activity etc – all of which were answered in my initial submission which had a cover letter attached.

There is a form that says: “Exceptional contract questionnaire”. It asks for an exceptional contract number (e.g 1, 2, 3), a Start Date and an End Date. Are my retail sales a contract in this regard? The customer in question pretty much just browsed my online store and asked for a price for X amount of jackets/coats and I reply with a price, he pays and I post. I've been told that the form is mainly for trades so, I am not sure how to fill this part in or which parts to fill in. Or can I simply attach printed invoices of the exceptional sales? Or do I have to strictly use the form they have given me even though the format doesn't fit?

I have a picture of the form but I am not sure how to upload a picture here.

Also later in the form it asks for the turnover figures for 24 months prior the date of going over the threshold (85K) and the 13 months AFTER the turnover went over the limit. Funnily enough since the reply from HMRC took so long, I actually have the ACTUAL figures for the 13 months after the breached threshold date. Do I use the ACTUAL figures, or do I use the forecasted figures that I had previously used when filling in the form over a year ago? I was under the impression that HMRC should have replied earlier!

Thank you all

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