Independent VAT Consultant
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VAT escape route for Brexit and Covid boomers

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Many businesses have enjoyed a temporary trading boom because of Brexit and the coronavirus restrictions. Neil Warren considers a possible escape route for a business that wants to stay out of the ‘VAT club’.

6th May 2021
Independent VAT Consultant
Columnist
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Government support has focused its efforts on businesses that have struggled during the pandemic. But there are some businesses that have seen an unprecedented sales growth in the last 12 months because they might, for example, sell goods or services online.

And many service businesses had a temporary boom in sales due to the UK’s final departure from the EU on 31 December 2020. So, what happens if a business that has happily traded below the annual £85,000 registration threshold for many years suddenly finds it has exceeded this magical figure? Is there a way to avert the need to register? The answer is yes – sometimes.

Selling home gym equipment

Let me introduce you to Carl. He imports gym equipment from China and sells it online to private individuals in the UK. His annual turnover has been £60,000 for many years but then gyms closed because of Covid-19 and his business boomed because of home exercising. He exceeded the threshold on 28 February 2021. Does he need to register for VAT on 1 April 2021, ie one month after exceeding the limit?

Exception to being VAT registered

The legislation recognises that some businesses exceed the threshold on a temporary basis because of a ‘one off’ good order or they do a job that has a different business model to satisfy a customer’s needs.

A common example is a labour-only builder who has a one-off big job where he also supplies materials. A business can ask HMRC for an exception to being registered if the following conditions are met:

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Replies (4)

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By Ben Alligin
10th May 2021 09:59

And what are the chances of HMRC responding to your letter?

I am still waiting on a decision on corporation tax from HMRC to my letter sent in December 2019!!

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By whiteways
10th May 2021 10:21

"HMRC will consider belated requests but you must focus on the known trading circumstances on the day the limit was exceeded, and not what has evolved between that day and when you write your letter."

That's not been my experience. They based their decision on the pattern of trading since the limit was exceeded. In fact, they wrote to me twice for further turnover updates because it took them nine months to reach a decision, and that was before the onset of COVID.

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Replying to whiteways:
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By Homeworker
10th May 2021 10:53

whiteways wrote:

"HMRC will consider belated requests but you must focus on the known trading circumstances on the day the limit was exceeded, and not what has evolved between that day and when you write your letter."

That's not been my experience. They based their decision on the pattern of trading since the limit was exceeded. In fact, they wrote to me twice for further turnover updates because it took them nine months to reach a decision, and that was before the onset of COVID.


I have successfully made three late applications for clients in recent years, without too much difficulty. Mind you one had ceased trading, which helped! With another we sent a list of monthly turnover which clearly showed a large "blip" and were able to satisfy them that the client (a curtain maker) did not normally trade at that level at had no intention of doing so going forward.
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By indomitable
10th May 2021 11:56

Useful article, thanks Neil

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