In an effort to ensure that all UK businesses with a taxable turnover exceeding the VAT registration threshold are accounting for VAT on relevant supplies in line with their VAT obligations, HMRC have issued letters to those they believe are trading above the threshold but have not yet registered to ascertain whether retrospective action is required.

Any business making taxable supplies exceeding £85,000 in a rolling 12 month period is required to inform HMRC of this fact within 30 days of the end of month in which the threshold was first exceeded and register for VAT, accounting for the correct amount of output tax on these supplies. Furthermore, if a business expects to exceed this threshold in the next 30 days alone, HMRC must be notified within 30 days of this expectation arising with the businesses effective date of registration being the start of this 30 day period.

When calculating taxable turnover VAT exempt sales, and those where VAT is due outside the UK are excluded, with all zero-, reduced- and standard rated supplies contributing towards the threshold.

If a business has become liable to register and account for VAT but has failed to do so, missing any relevant deadlines, HMRC may look to apply a late registration penalty, calculated as a percentage of VAT due to HMRC that has not been accounted for. Therefore, the longer the delay in notifying HMRC and taking steps to remedy the situation, the greater the financial implications for the business.

Businesses that have exceeded the threshold temporarily before subsequently falling below the deregistration threshold of £83,000 should still notify HMRC as VAT may still be due on sales made when the business should have been registered. Exception from registration can be sought under these circumstances.

 If you or your client have received such a letter and wish to take steps to resolve this matter or have not yet received this notification but fall within this bracket and have not registered for UK VAT despite being legally obliged to do so, please speak someone on our free VAT helpline at the earliest opportunity for advice on how to meet your VAT obligations and mitigate any potential penalties HMRC may look to apply.