Hi all, apologies for this post but someone has just mentioned to me their understanding of vat registration which has caused me doubts. Its one of those nights! Can anyone clarify for me please.
A limited company formed January 2012.
Didn't start trading until January 2013.
By May 2013 their turnover exceeded vat threshold.
Is it correct that because the company has not been trading for 12 months, they do not have to register for VAT (until January 2014 if still over the threshold). If after 12 months of trading they are not over the threshold, they have another 12 months before they have to review it again. I.e. not considered on a cumulative basis? Thank you
-- Edited by morgwick on Monday 30th of September 2013 10:49:55 PM
I stand to be corrected but I've always taken it that if taxable supplies in the previous 12 months or less breaches the VAT threshold then the client must be registered for VAT.
where we ended up with a bit of a debate over the historic test verses the next 30 days test but I don't think that there was any suggestion that if you go over the limit using the historic test, even if thats within a couple of months of starting the business then you need to be registered for VAT.
The test is cumulative and needs to be reviewed monthly.
kind regards,
Shaun.
p.s. you might find the VAT threshold thread in conjunction with 700/1 useful as that word "alone" caused quite some debate.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
What you believed to be correct, was what I believed to be correct, but then a new accountant who I have just met has informed me that as a client of mine is a new company, you wait 12 months before reviewing. Apparently he has had this confirmed by HMRC? So obviously I start doubting myself! But paragraph 3.3 clearly states "or less", so I think we are correct, which leaves me with a client who has failed to register for VAT from July!
1. Register if within the previous 12 months or less you exceed the VAT threshold. This could be at any point from month 1 to 12 in the first year. Each month going forward you always need to review the previous 12 months back to see if you exceed it.
2. If you expect to exceed threshold in the next 30 days alone you need to register (this rule is less commonly applied and applies to businesses that get large chunks of monies in one month)
So if they start in trading in Jan 2013 and exceed £79k by end of May 2013 then they should have registered for VAT from 1 July 2013. They can go back and charge their customers the VAT amount (or they may just need to take the hit for the VAT element themselves). There also the penalties that they may have for not registering at correct time but sounds like they could claim against their advisor for wrong advice for these.
In the example, May 2013 is given as the month that the threshold was breached, and this is why Mark is saying that they would have to go back and work out VAT from 01.07.13, as this the date HMRC would impose.
01.07.13 would be the effective date of registration, regardless of when they receive the form.
HTH
-- Edited by FoxAccountancyServices on Wednesday 16th of October 2013 11:57:55 AM
1. Register if within the previous 12 months or less you exceed the VAT threshold. This could be at any point from month 1 to 12 in the first year. Each month going forward you always need to review the previous 12 months back to see if you exceed it.
2. If you expect to exceed threshold in the next 30 days alone you need to register (this rule is less commonly applied and applies to businesses that get large chunks of monies in one month)
So if they start in trading in Jan 2013 and exceed £79k by end of May 2013 then they should have registered for VAT from 1 July 2013. They can go back and charge their customers the VAT amount (or they may just need to take the hit for the VAT element themselves). There also the penalties that they may have for not registering at correct time but sounds like they could claim against their advisor for wrong advice for these.
Mark
Hi Mark
What do you mean by 'they can go back........etc'. Is this assuming that they should have already been registered?
I thought that when you register within the time limit (i.e., by the end of the month following the month end in which you breach the threshold), the registration kicks in on the first day on the month following the month following the date registered.......e.g., if you registered by end June, they would be registered effective date Aug 1st? I also assumed that there is no liability for either the first £79k (although capital and services can be claimed for specific previous periods) or the period in which it takes for the registration to take effect......i.e., from May xth to end July?
I have just re-read the paragraph above on registration and expect that the HMRC site sets out a lot more clearly!!
