Need advice regarding VAT registration for a ltd company

BorrisJ

Hello ladies and gents

I have a small ecommerce business (ltd company), and its turnover has gone over the threshold of £85k in the last 12 months period, however, as I'm taking roughly 4 months off work during which my business won't be trading, its annual turnover for the tax year 22-23 tax is going be less than £85k, do I still need to register for VAT? I ask this because my company's turnover for the next tax year wont be over the £85k either, the usual turnover is around £50k and I expect the next year's turnover to be slightly less than that. Has anyone got experince with a situation like this? Any advice would be highly appreciated.

Jeremy535897

See https://www.gov.uk/register-for-vat

If you go over the threshold temporarily

You can apply for a registration ‘exception’ if your taxable turnover goes over the threshold temporarily.

Write to HMRC with evidence showing why you believe your VAT taxable turnover will not go over the deregistration threshold of £83,000 in the next 12 months.

HMRC will consider your exception and write to confirm if you get one. If not, they’ll register you for VAT.

BorrisJ

Jeremy535897 said:

If you go over the threshold temporarily

You can apply for a registration ‘exception’ if your taxable turnover goes over the threshold temporarily.

Write to HMRC with evidence showing why you believe your VAT taxable turnover will not go over the deregistration threshold of £83,000 in the next 12 months.

HMRC will consider your exception and write to confirm if you get one. If not, they’ll register you for VAT.

I was actually aware of that, and did mention it to my accountant but he said it's not a good idea and it's better to just register, but I'm really sure if that advice is objective because he stands to earn much more money from me as he charges twice as much for vat registered ltd companies compared to those not registered for vat.

Jeremy535897

Did your accountant explain why it was not a good idea, in circumstances where you are unlikely to reach the threshold again in the future?

tightauldgit

BorrisJ said:

Hello ladies and gents

I have a small ecommerce business (ltd company), and its turnover has gone over the threshold of £85k in the last 12 months period, however, as I'm taking roughly 4 months off work during which my business won't be trading, its annual turnover for the tax year 22-23 tax is going be less than £85k, do I still need to register for VAT? I ask this because my company's turnover for the next tax year wont be over the £85k either, the usual turnover is around £50k and I expect the next year's turnover to be slightly less than that. Has anyone got experince with a situation like this? Any advice would be highly appreciated.

The following advice is not what the law says so take it as that and use your own judgement but if I was in your situation if you are CERTAIN your tax return will be less than 85k (and since it seems like its only crossed the threshold for one month?) then I wouldn't bother registering for VAT. HMRC have no way of knowing what your monthly income is and whether or not you've crossed the threshold in a given month. 

However if you submit a tax return with more than 85k of earnings and haven't registered for VAT you would potentially start all sorts of rabbits running around at HMRC. 

If you want to be sure then request an exemption as suggested. 

The other approach might be to register for VAT and then unregister as soon as you go below the threshold again. If you do register make sure to look and see if there are any purchases that you can go back and claim back VAT for. 

BorrisJ

Jeremy535897 said:

Did your accountant explain why it was not a good idea, in circumstances where you are unlikely to reach the threshold again in the future?

Not really, he just said he'd recommend registerting and then deregistering after like 2 vat submissions if the turnover is below £85k, so like 6 months. This to me seems to be complete waste of time and money as I already know my turnover for 22-23 tax will be below £85k.

BorrisJ

tightauldgit said:

The following advice is not what the law says so take it as that and use your own judgement but if I was in your situation if you are CERTAIN your tax return will be less than 85k (and since it seems like its only crossed the threshold for one month?) then I wouldn't bother registering for VAT. HMRC have no way of knowing what your monthly income is and whether or not you've crossed the threshold in a given month.

That's exactly what I was thinking as well, since I'm 100% sure that the turnover for 22-23 tax will be below £85k then I honestly see no reason why it would be necessary to register for VAT, but my accountant advised against it so I was hoping to get unbiased opinions of small some business owners or accoutants.

tightauldgit said:

The other approach might be to register for VAT and then unregister as soon as you go below the threshold again. If you do register make sure to look and see if there are any purchases that you can go back and claim back VAT for. 

This suggestion is great too, the accountant recommended doing that. Ideally, I'd like to avoid registering to avoid unnecessary extra accounting costs/hassle, will keep that as the last option.

tightauldgit

Registering and paying VAT isn't honestly all that big of a deal - especially if you already have some automated accounting systems. It does all have to be done digitally nowadays though. Depending on if you have acquired any equipment for the business you might find that your submission is actually a refund if you claim back more than you need to pay. Worth considering. 

I think your accountant really has to advise against not registering since the law says you have to. He can't advise you to break the law.

Jeremy535897

Following the introduction of the VRS (VAT registration service), and the movement of all taxpayers to MTD, it can take months to get registered, during which time you have to tell everyone you sell to that you are pending being registered for VAT but cannot currently issue a VAT invoice, so will have to issue a VAT only invoice when you eventually are registered. I have no idea how long it takes to get deregistered. If your customers are not VAT registered, they will hate you for this. Don't register unless you have to, or need to because you need to claim input tax back. You can avoid registering for VAT without "keeping quiet" using the method I posted earlier. Ask your accountant how many businesses he has got registered recently, what the lead time is, and how much hassle it causes.

monkeycat25

I recently (Aug)  had to register for VAT as I went above the threshold... it took until Nov to get my VAT number & I told my accountant the simplified scheme would be enough - so technically they registered me. Most of my business is outside the scope of UK VAT (all my invoices until Jan 2020 where exports) No suddenly I have to go back over all of my expenses to detail the VAT as it seems my accountant just registered me for the full scheme...I'm pretty irritated but from previous dealings, VAT are worse than HMRC (now combined) and I don't ever want to fall foul of VAT.