You can google the VAT registration threshold – its currently £85k – but so many people look at their wrong sales figure to compare to this number – and registering for VAT late can be very expensive!
You have to register for VAT when your “VAT taxable turnover” in a 12 month period is over £85k. If we take ” VAT taxable turnover” to be your sales (which simplifies it somewhat,) then you need to look at your sales figure for the last 12 months.
This is NOT THE SAME AS YOUR SALES SINCE THE START OF YOUR FINANCIAL YEAR.
There is no starting again when you get to your year end – you need to look at your sales figure for the last 12 months – ON A ROLLING BASIS.
So you need to look at Sept 17 – Aug 18, and then Oct 17 – Sept 18, then Nov 17 – Oct 18 etc etc.
If your turnover is around the £75-80k, you need to keep a close eye on it each month to see if you have gone over the registration threshold. If you have exceeded £85k, then you have one month in which to register for VAT and then you need to start charging VAT in the following month.
For example if your sales for the year Sept 17 to 31 Aug 18 were over £85k for the first time, then you need to register by 30 Sept 18 and you will be registered from 1 October.
If you are late in registering, then you are deemed to be register from 1 October anyway, and you are liable for the vat that you should have been charging, plus potentially a penalty, so this can be very expensive for your business!
If your turnover has gone over the threshold temporarily, say you have sent out an unusually large invoice – you can apply for an exception to registration, but you need to write to HMRC with evidence that you sales for the next 12 months will be under the VAT deregistration threshold of £83k.
So do keep an eye on your turnover if you are close to the threshold. I see late registration time and time again, as business owners only look at current year sales, not sales for the last 12 months.
For more information then please contact Rosie Forsyth at Wilkins & Co.