I just formed a company at the end of December 2010, and have a question about VAT registration.
I've been trading as a sole trader ( self - employed ) for about 4 years before incorporating my first company, in last December, just before incorporation, my last 12 months turnover was very close to £70,000 threshold, now I already stopped trading as self employed, just wondering when should I register company for VAT , is the time my company itself's turnover reaches the threshold (started from Dec 2010) or it has to include self-employed period, I mean to calculate it continuously from my self-employed period ?
Hope that makes sense
sorry about my English, which is not my first language
As the limited company is a separate legal entity from your sole trader business then turnover for the limited company starts from £nil for VAT purposes. You dont carry over your sole trader turnover.
You are required to register for VAT if either your turnover in the last 12 months is greater than £70k (assuming that this will continue for 12 month periods going forward. If you can prove it is temporarily and that will go below the dereigistration level of £68k then you dont need to register) if you you think your turnover in the next 30 days will be more than £70k.
You are required to register for VAT at the start of the month after when you cumulative turnover exceeds £70k. As an example, if your cumulative turnover for Dec 10 to Sept 11 is £65k and then in Oct 11 you have £10k turnover then your cumulative turnover for the 11 months to Oct 11 is greater than £70k ie £75k. As this is a 12 month period or less then you will be required to register and account for VAT from the start of the month after Oct 11 ie 1 Dec 11 and start charging VAT on your sales from 1 Dec 11. Will also be able to reclaim vat on purchases/expenses.
Always worthwhile rather than just going the down the conventional 3 month invoice VAT return route to consider other options to see if it will save you time or be financially beneficial. So worth consider annual VAT accounting, cash VAT accounting and Flat Rate VAT.
Hopefully this helps.
Look at HMRC website www.hmrc.gov.uk as there is a lot of good info about VAT there.
I thought that if you transfer a business as a going concern then you would have to include both the turnover from the self employed business and led company in ur registration threshold calculations. A business is transferred as a going concern if it will continue to run as it is just under a different entity. I would suggest you double check this with hmrc as if I am right but you only account for the sales in the limited company the fines could be massive.
A slightly different scenario, but is the 12 months a rolling 12 months?
What I mean is, if a brand new company is formed in Jul 2010, but doesn't start trading until say Feb 11, their year end will be Jul 11, at which point the sales turnover will not have reached the 70k threshold. Does the calculation reset back to zero on 1 Aug (i.e. start of the next accounting period), or will the VAT registration calculation period run from Feb 11 to Feb 12?
Just to clarify in my own mind......it doesn't matter that a business only turns over say 50k in their first year, they will still need to register as soon as they hit 20k in their second year (provided it is all within the first 12 months of trading).
Easiest way to check is at the end of every month go back 12 months and see if has went above £70k in that 12 months period. If so you are required to be registered from the start of the month after
eg
Jan 10 - Dec 10 - £65k dont need to register Feb 10 - Jan 11 - £68k dont need to register Mar 10 - Feb 11 - £71k need to register as above £70k in the previous 12 months need to register from 1 April 2011 ie the start of the month after going above £70k
Accounting years are disregarded (what is important is the last 12 calander months.). Of course if you go above £70k in less than 12 months then you are required to be registered from the start of the month after when you go above the £70k.
You can avoid having to register if you can prove to HMRC that you have temporarily went over the £70k threshold and believe in the long run you will be trading below the £68k deregistration limit.
