Vat

barnaby41

Hello,
I am looking for some advice. I have a limited company which has gone over the vat threshold. Due to my circumstances I don't expect to receive anymore work for a few months as I will be taking time off for family reasons. In a few months I will fall below the vat threshold.

Do I have to register for Vat, then deregister once I fall below the threshold in a few months? even If I have effectively stopped trading? Or am I better calling Hmrc and explaining my circumstances, and asking for an exception?

Any pros and cons of each solution I should be aware of?

TIA

Pennywise

Yes, you need to make the usual application to register for VAT, but at the same time, you also need to make an application to deregister, giving the reasons why you're turnover will be under the deregistration threshold for the forthcoming 12 months, and why the registration was temporarily breached. You should do both via the paper application forms you can print off from the HMRC website and post them together to the VAT registration department.

If you are only breaching the VAT threshold for a very short period of time due to a particularly large sales invoice, or timing (i.e. two Easters in the same year), then they may, by concession, agree you don't need to register at all, but if you are going to be in breach for several weeks/months, then they'll probably register you and you'd need to remain registered for a period of time, before you'd be eligible for deregistration.

It all depends on the timings, reasons, numbers, etc., so the more information you provide to HMRC, the better, and the more chance you may benefit from a concession (NB they have no legal obligation to allow you to deregister immediately - it's entirely at their discretion).

If you don't apply for VAT registration, if/when HMRC do a compliance check and find you were over the limit, they'll want VAT (and penalties) from the date you should have registered right through to the time they find out, the reason being that VAT deregistration can't be backdated so you'd be liable under failed registration for several months/years until you deregistered.

I don't think it's a good idea to phone them to tell them - far better doing it all properly on paper as you'll have proof/evidence of what you've told them and how they respond.

NB you may actually benefit from registration as you can reclaim some VAT incurred in the period prior to registration (6 months for services) and also on goods/equipment still in hand as at the date of registration, which may be substantial and offset any downsides. Maybe best to do the numbers first before you decide whether you want to apply for immediate deregistration.

barnaby41

Thank you for the detailed post Pennywise.

Do I need my accountant to register me for vat, and fill our my vat return for the next 3 months or am I able to do it myself? They've quoted £150 just to register me for vat, and £50 per quarter for filing the vat return.

barnaby41

It would be the flat rate scheme.

As I say I would not be trading until I am back below the threshold, so there would be no vat to claim or pay.

If I can just register myself I'm happy to do that and let them take care of the rest.

MDMD

barnaby41 wrote: »

Thank you for the detailed post Pennywise.

Do I need my accountant to register me for vat, and fill our my vat return for the next 3 months or am I able to do it myself? They've quoted £150 just to register me for vat, and £50 per quarter for filing the vat return.

It’s worth getting an accountant unless you know what you are doing with MTD and VAT. If you get it wrong they can penalise you....

https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat/vat-notice-70022-making-tax-digital-for-vat