Crossing the VAT threshold

dudes_2

As a small business, we have never done enough business to force us to go VAT registered (arounf £67k I think).

However, we have a few projects coming in that will mean we have to registered, but we are unsure how to handle it. All together these projects will be well over the limit.

The problem is, its all happening at the same time. Prices have been agreed, but when they all go through in the next couple of weeks, we may have done around £80k of business.

So, would we have done anything wrong by not charging VAT on the jobs that pushed us over the limit?

fengirl_2

If you are VAT registered at the time you issue your invoices, then you have to charge VAT. You should warn your customers that you may be VAT registered by the time you invoice them. You do realise the limit is £68k in a 12 mth period, not an accounting year?

JasonLVC

The actual legislation states that if you HAVE or believe YOU WILL exceed the VAT threshold of £68k in the next 30 days then you have to notify HMRC and be compulsorily registered for VAT.

So if we are in October 2009 and your turnover in the last 12 rolling months is say £55k then no problem.

If you think the invoices you are going to raise in November 2009 will put you over that £68k rolling 12 month threshold, then you have to notify HMRC.

If you believe this contract is a one-off blip and that after this job is fonshed you will be back to your lower turnover levels, then you can apply for exemption from VAT. You need to still complete a VAT registration form (VAT1) and there is a box you can tick asking for exemption - you'll have to explain yourself as to why this is a one-off job.

HMRC will then accept your registration form and write back confirming you are exempt from registration. This is becuase once you go over the £68k it is mandatory that you notify HMRc and register - so you still have to notify and HMRC in order for them to exempt you.

RLH33

We had to go VAT rated a couple of years ago as we realised a big job that we were doing at the time was going to push us over the limit.

I would be very careful if you think you will go over the limit and it is not a one-off as you will be liable to pay VAT on those invoices that pushed you over regardless of whether or not you charged it. This can end up being a very big VAT bill.

leveller2911

I have a small joinery worshop and was getting close to the VAT limit about 4 years ago and like Fengirl says its over a 12 month period, ie: its rolling and not set from say May-May or July-July rather than get a fine I went registered.

The down side is of coarse I have to charge VAT on my labour but I claim back against my VAT bill the Vat on materials that Ive brought.
Once I went registered I was also able to claim all the VAT I paid on all of my machinery which was about £7k..

Its a mixed blessing.