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Any business or sole trader who makes taxable supplies, the value of which exceeds the VAT registration threshold (currently £83,000), will be liable to register for VAT and charge output VAT on these supplies. However, if the value of taxable supplies exceeds the VAT registration in a 12 month period but supplies in the next 12 months will not exceed £81,000 (the current VAT deregistration threshold) exception from registration can be sought. In the case of Facade Detailing Service (“FDSâ€), the business exceeded the VAT registration threshold in the tax year 2012-2013 whilst providing services in the construction industry. The reason for the threshold being exceeded was due to a one-off contract which would not recur. In early 2014, once this contracted has come to an end, the business applied for exception from registration and supplies HMRC with  detailed turnover figures for the two years ending March 2014 – this initial application was rejected on the grounds that the Appellant could not demonstrate control over the value or duration of the relevant contract resulting in an appeal to the First Tier Tribunal. The First Tier Tribunal stated that they “must come to the decision that they believe would have been made at the time the threshold was breached†and so the facts had to be considered as if they were presented in February 2013 – when the application should have been submitted – as opposed to early 2014 when the submission actually took place. As FDS could not predict when the contract would end with any certainty, the taxable turnover of the business for the coming months could also not be accurately foreseen. The Appeal was dismissed on the same grounds as were outlined previously, being that exception from VAT registration must be sought on the basis of projected turnover and not using facts in hindsight. If you or one of your clients is seeking exception from VAT registration on the basis of taxable supplies temporarily breaching the VAT registration threshold, speak to one of our consultants on the VAT helpline to clarify your eligibility and determine the best way forward for the business.  It is important that some thought is given to the application that is made to HMRC.

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