When is VAT Registration threshold reached

When is VAT Registration threshold reached

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Can someone confirm my thinking regarding VAT registration threshold, ie that it is based on when the invoiced sales reach £73000 rather than when the cash received exceeding £73000.

Also that this applies even if wishing to register under the flat rate scheme on the cash-based turnover method.

Cheers

FM

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By spidersong
01st Jun 2011 14:49

Either or Neither

When VAT become accountable, and hence when it becomes included in the turnover calculation, depends on its 'tax point'.

The tax point is normally the earliest of a) the work being done, b) the invoice being issued, or c) the payment being received.

If the work is done first then this 'basic tax point' can be overridden by an invoice being issued within 14 days.

So if you issued invoices for £70K in April and May, and then took a prepayment on 31st May for £4K without invoicing, then your turnover has reached the threshold in May even though you've only invoiced £70K.

Likewise is you supplied goods to the tune of £75K in April and May, without invoicing till July or receiving any money till then you've still breached the threshold in May.

If you invoiced for £70K in April and May, and then supplied goods worth £4k on the 31st of May, but didn't invoice or receive payment for them until 10th June, then you haven't breached the threshold until June.

This is the same whether you want to cash account, flat rate, annual account or whatever. But if on cash accounting then you'd only account for VAT on those items with a tax point after your date of registration, i.e. if you've invoiced or supplied goods prior to the date of registration but don't receive payment until after then there's still no VAT to account for on that payment.

So if you always invoice (and do it either before or fairly soon after making a supply) before receiving payment then the relevant date for calculating turnover will be when the invoices are issued.

Hope this helps

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By spenner68
01st Jun 2011 20:55

Thanks !

great stuff, thank you very much !!!

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