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VAT registration threshold exceeded

Is it worth trying to claim exception due to coronavirus

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I have a client who commenced trading in June 2020 as a domestic appliance engineer (repairing, servicing and installing white goods). He recently contacted me and advised that he exceeded the £85,000 VAT registration threshold at the beginning of March 2021. Having looked at his monthly figures for the nine/ten months since he started, he was over the monthly average of £7,083 (£85,000/12) in six of the months and very high (approximately £12,000) in four of those.

He believes that this has occurred because people have not been able to go on holiday due to coronavirus and instead spent their money on their homes. Turnover going forward is likely to be more like £5 - 6,000 per month, well below the VAT threshold.

About 50% of his work is for lettings agencies, so they would not really be affected by him being VAT registered but obviously the 50% of 'private' customers would see their prices rise.

He will need to register by 30 April and become registered from 1 May. Does anybody think there is any point in trying to claim VAT exception due to exceptioanal circumstances taking him over the registration threshold or is he just going to have to bite the bullet for now until he can potentially de-register? The 'high' months will not start to fall out of the rolling twelve month calcualtion for another six months or so.

Any thoughts would be gratefully received.

Replies (5)

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By Paul Crowley
19th Mar 2021 15:41

Letting agencies operating correctly do not claim back VAT for their clients. Their clients are not VAT registered
You can request, it is up to HMRC
But HMRC cannot cope with paper and have apologised for being rubbish on VAT.
You probably will not get an answer in time
Covid will be the excuse they use
But they could not cope before Covid

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By Matrix
19th Mar 2021 16:19

MichaelH wrote:

The 'high' months will not start to fall out of the rolling twelve month calcualtion for another six months or so.

I thought the deregistration test was prospective.

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By lesley.barnes
19th Mar 2021 16:39

Its a bit of a risky game - how will the client show that he won't exceed the deregistration threshold the following month, or the month after? Given that HMRC are not the fastest to respond if he puts in a request for an exception and HMRC turn it down he could be liable for VAT from 1st May. I wouldn't be convinced that it is because of corona virus especially since he has no trading history before June 2020 to base this on. You could try, it wouldn't be my chosen route and I would be making sure I covered myself incase HMRC said no and he ended up with a backdated VAT bill.

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Jason Croke
By Jason Croke
19th Mar 2021 17:30

So he hit the £85k in March 2021, so is required to register for VAT from 01st May 2021.

If he believes that his turnover to date was a "spike" due to Covid, then he can register for VAT online and near the start of the registration process, there is a box to tick asking for exemption from registration.

So if you or client does this online, they can ask for exemption and then input details of the business and answer the questions on why they want exemption and submit, you'll get an answer much quicker than writing to HMRC.

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By Jane Wanless
19th Mar 2021 17:54

Is the forward figure of £5-6K per month based on anything other than guesswork?

A reliable domestic appliance engineer is like gold dust round here, and if word gets round, likely to get a lot of business. Holidays wouldn't affect this, so maybe current turnover isn't so exceptional.

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