Last year, HMRC where giving businesses an amnesty for such a scenario. Unfortunately, that has now ended.
Your client should have been regsietered from 1st October 2011 onwards. HMRC will expect you to register for VAT one month after after the end of the month in which the threshold.
What you should do is register for VAT and make a voluntary disclosure of the error. They may restrict the penalty to 10% on the late payment of VAT.
Output VAT - yes, your client would have to pay the VAT if he cannot invoice the VAT on to his clients. This is likely to be a commercial decision dependent on whether the sale was made to a VAT-registered business and, therefore, be able to recover the VAT charged.
Input VAT - Obviously the Input VAT from October 2011 can be used. But you also have the pre-registration rules whereby:-
for goods: you can reclaim VAT up to three years before you registered for VAT
for services: you can reclaim VAT up to six months before you registered for VAT
To able to make this claim, the following conditions have to be met:-
the goods were bought by you as the entity (for example, the individual, business or organisation) that is now registered for VAT
the goods are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply
the goods are still held by you or they have been used to make other goods you still hold
-- Edited by Truemanbrown on Sunday 22nd of April 2012 11:16:07 AM
Will my clients have to pay the sales vat (unless he wants to rebill his clients and collect the vat ?) and offsite the purchases vat against it. Purchases vat back to only oct 11 ?
