As a business owner, it’s important to keep track of your financials and ensure that you are following all of the necessary regulations. One of these regulations is VAT, or Value Added Tax. If your business turnover has exceeded the VAT threshold of £85,000 during the past 12 months, or if you expect it to exceed that amount in the next 30 days, then you are required to register for VAT.
The 12-month period for VAT threshold is a ‘rolling period’, which means it is based on the last 12 months of your business operations, regardless of the tax year or your own accounting year. This means that if you have recently experienced an increase in sales, you may have gone over the VAT threshold without realizing it. If you exceeded the threshold in the last 12 months, you have to register within 30 days of the end of the month when you went over the threshold. For example, if you exceeded the threshold on May 4, 2022, you must register by the end of June 2022, and the effective date of registration will be July 1, 2022.
It’s also important to note that if you purchase a business that is already VAT-registered, or if you take over another business and the combined turnover exceeds the threshold, you must also register for VAT.
If you expect to exceed the threshold in the next 30 days, you have to register by the end of that 30-day period. However, the effective date of registration will be the date you realized that you would exceed the threshold, not the date your turnover will go over the threshold. For example, if you expect to exceed the threshold at the end of November 2022, you must register by November 30, 2022, and the effective date of registration will be November 1, 2022.
So what happens if you didn’t realize you went over the VAT threshold and failed to register for VAT? You could face penalties, so it’s best to act as soon as possible. You can register for VAT online through HMRC’s website, or you can use the services of an accountant to help you with the process.
By registering for VAT, you are responsible for collecting VAT from your customers and paying it to HMRC. However, it can also bring some benefits, such as the ability to claim back VAT on your business expenses.
Late registration for VAT can result in serious consequences for businesses. If you have missed the deadline for registering for VAT, it is important to take action as soon as possible to minimise any penalties.
HMRC strictly enforces the registration deadline and can impose penalties if you fail to meet it. The penalties vary depending on how late you were in registering, but there is a minimum penalty of £50. The penalties can also include the full amount of VAT that should have been paid since the date of registration, as well as a percentage of VAT due.
For example, if you are nine months or less late in registering, you will be required to pay a 5% penalty on top of the full amount of VAT that should have been paid. If you are between nine and 18 months late, the penalty increases to 10%, and if you are more than 18 months late, the penalty is 15%.
If you believe there was a reasonable excuse for missing the deadline, you can appeal to HMRC. However, there are no formal guidelines on what constitutes a reasonable excuse, and each case is reviewed on an individual basis. Examples of reasonable excuses may include personal or family illness, or commercial difficulties.
It is important to contact HMRC within 30 days of the penalty being issued if you wish to appeal.
If you have exceeded the VAT threshold and are in need of support to register for VAT, contact Carter Clear today! Our knowledgeable and experienced team will assist you every step of the way and ensure that you stay compliant with all VAT regulations. Don’t let missed deadlines and penalties cause stress and financial burden for your business – let us help you today!