V A T

I wouldn't write to them. If you exceed the turnover then you MUST become VAT registered - it's mandatory. HMRC may not pursue you for it (depends upon your local VAT officer's attitude), but it will certainly flag you up for them to review you next year!. HMRC are getting much more pedantic over these things.

I suggest you go back to your accountant (or yourself if it's you) and see if you can lose the £400 somewhere - like a credit note perhaps or something similar. Failing that you may just get away with it or worse case if you are inspected plead ignorance and pay the interest and mis-delcaration penalty (which, seeing as you are already past the point you should have registered, you'll be liable for anyway) but you'll need to be mindful that next year you'll likely exceed the threshold if business remains the same so start planning for VAT registration - it is inevitable for you by the sounds of things.

There are ways around it (never easy), but can include two seperate companies each earning £30k per annum and thus under the threshold but dependsupon what your trade is and your view on risk. If your a buider, you can occasionally get your clients to buy the goods/materials and you just charge for labour thus reducing your overall turnover, but you can't do this too often as HMRC will notice this pattern as tax evasion.

I've seen HMRC demand retrospective registration in such circumstances and that means backdating of VAT due which if you cannot get from your clients, means you'll have to pay. PLEASE do not write to HMRC. Would you tell the tax man you earnt an extra few grand cash in hand?. Trust me HMRC are worse than the tax man.

Would you tell the tax man you earnt an extra few grand cash in hand?

This would depend on whether you wanted to commit tax fraud or not.

Pipcola,

I do know the difference. HMRC are a merger between the inland revenue (tax) and HM Customs & Excise (VAT and duty) but they are still seperate in terms of how they operate internally. You don't send you P11D to the VAT man for instance and the customs side of the team have much more power than the revenue side of the team and are seen, moving forwards, as a key driver in increasing government revenue. I'm trying to offer some professional advice to the OP here.

Aark,
You could write and ask for exception to registration but the OP would have to prove his turnover would be less than the de-registration limit of £59k in the following year. So he'd have to deliberately earn £2k less next year to achieve this to avoid registering over £400 - hence my sugestion to lose it (legally) if he can. Also, in what month was this identified (op doesn't say), but difficult to ask for an exception if he passed limit say four months ago and then no other work until now. Some sole traders are known to simply stop working once they get close to the threshold to avoid registration and instead take up temporary work so that they are still earning an income, just not business generated. (ie, work for yourself for 10 months upto £60,500 then get a job in Tesco/building site/office to still earn an income but not affect your turnover of your business).

Pipcola,
With regard the customer buying goods for the builder, this falls foul of government implemented anti-fraud/mony laundering legislation which allows HMRC to conect seperate activities, if it feels a tax is being avoided, hence, whilst you will not go to prison, you will be liable for any evaded taxes and interest and penalties - which is why I suggested this trick is only done once or twice as HMRC couldn;t prove it was at the clients request to purchase the goods - but would raise an eyebrow if ALL the clients bought the supplies. The tribunals are full of recent cases where HMRC are removing the chinease walls between associated companies and analysing the activities of sole traders who deliberately try to avoid registration through such techniques.

I'm guessing your not an accountant or all this would be familiar to you.