The basic rule
If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current VAT registration threshold of £77,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT. This must happen within 30 days of exceeding the registration threshold of £77,000 to avoid penalties and interest. Details of how to register can be found on the HMRC website or contact us for information.
If you took over another VAT-registered business within the last 12 months, then when you regularly check your turnover for the previous 12 months against the threshold, you should take into account the turnover of the business before you bought it as well as your own turnover.
Temporarily exceeding the threshold
If your turnover has gone over the registration threshold temporarily, then you may be able to apply for an exception from registration if you can demonstrate to HMRC that in the longer term you will only be trading below the de-registration threshold of £75,000. To apply for exception you will still need to complete a VAT registration form and state why you are applying for exception.
How do I calculate the taxable turnover
Your VAT taxable turnover includes the value of any goods or services you supply within the UK, unless they are exempt from VAT. This means you must also include any supplies you make that would be zero-rated for VAT.
When calculating your VAT taxable turnover you will include your sales, but for VAT purposes, you should also include the value of certain other types of supply:
- goods or services that you exchange or barter
- supplies of certain services that you receive from suppliers in other countries that you have to 'reverse charge'
- where you use your own labour to construct certain building or civil engineering works for your own business use with an open market value of £100,000 or more
You must not attempt to avoid registration by artificially separating business activities to reduce your turnover. If you run more than one business, the sales in all those businesses must normally be added together to determine whether or not you must register for VAT.
However, if you are involved in the running of several separate legal entities, you may not need to combine the sales of those businesses to find whether you need to be VAT-registered.
For further help and advice please contact us.
