VAT Threshold advice ... close to the limit letter..

sidneyyoungblood

Asking on behalf of a neighbour … a couple of weeks ago she received a  letter from HRMC saying that her turn over was getting close the VAT threshold ( 84k of the 90k threshold ) ... She always tracks her income on a weekly basis making sure she is usually around  10% under the threshold . 

Is the need to register  only when she goes over the 90k mark within a 12 month period or can HRMC insist if she gets close to the amount ? 

 Example if she turns over 89k will she  be ok ?

She is a soletrader selling used clohing online alot of the turn over is from the postage costs ..

caprikid1

"She is a soletrader selling used clothing online alot of the turn over is from the postage costs .."

Unfortunately that does not matter how the total is made up postage is part of turnover.

I don't think HMRC will insist,  I think she can declare it won't be happening / momentary blip.

Grumpy_chap

She has to register if the turnover on a rolling 12-month basis exceeds £90k or if she expects that threshold to occur within 30 days.

Bookworm105

sidneyyoungblood said:

Is the need to register  only when she goes over the 90k mark within a 12 month period or can HRMC insist if 

the rules for registering are simple facts there for the finding. Look backwards on a 12 month rolling basis or loo forwards 30 days. If you fail to register when you have breached those then HMRC can sanction you, but they can't "make" you register if you have not breached .

Register for VAT: When to register for VAT - GOV.UK

looking back:
You must register if your total taxable turnover for the last 12 months goes over £90,000.
You have to register within 30 days of the end of the month when you went over the threshold. 

or looking forwards (this one really only applies when you have a large transaction)
You must register if you realise that your total taxable turnover is going to go over the £90,000 threshold in the next 30 days only (ie 90k in that 30 day period only). You have to register by the end of that 30-day period. 

As her business is the sale of clothes then yes (if adult) the clothing is standard rated, but does she incur and VAT on her stock purchases? If no, then she could opt to use the second hand margin scheme whereby she charges Vat at the reduced rate of 16.67% (instead of 20%) on the her profit margin only, not on the full price of the item. Means she pays less Vat, so could keep her prices lower if she qualifies for use of the scheme 

Jeremy535897

Actually you should check every day to ensure your turnover has not exceeded the registration threshold.
https://www.gov.uk/register-for-vat
The forward looking 30 day rule applies only if you expect to exceed the threshold in that 30 days. While the wording is not 100% clear, the example given is where one invoice of £100,000 is going to be issued, exceeding the registration limit on its own.
The more detailed VAT booklet makes this clear:

• at any time, you expect the value of your taxable supplies in the next 30 day period alone, to go over the registration threshold

sidneyyoungblood

Bookworm105 said:

sidneyyoungblood said:

Is the need to register  only when she goes over the 90k mark within a 12 month period or can HRMC insist if 

the rules for registering are simple facts there for the finding. Look backwards on a 12 month rolling basis or loo forwards 30 days. If you fail to register when you have breached those then HMRC can sanction you, but they can't "make" you register if you have not breached .

Register for VAT: When to register for VAT - GOV.UK

looking back:
You must register if your total taxable turnover for the last 12 months goes over £90,000.
You have to register within 30 days of the end of the month when you went over the threshold. 

or looking forwards (this one really only applies when you have a large transaction)
You must register if you realise that your total taxable turnover is going to go over the £90,000 threshold in the next 30 days only (ie 90k in that 30 day period only). You have to register by the end of that 30-day period. 

As her business is the sale of clothes then yes (if adult) the clothing is standard rated, but does she incur and VAT on her stock purchases? If no, then she could opt to use the second hand margin scheme whereby she charges Vat at the reduced rate of 16.67% (instead of 20%) on the her profit margin only, not on the full price of the item. Means she pays less Vat, so could keep her prices lower if she qualifies for use of the scheme 

Thanks , I think she buys most of the items from VAT registered companies ( auction houses etc ) so not too sure if the second margin scheme would be available   .  Her turn over is high just to make it worthwhile  , issue I think is that the VAT threshold was put on hold for a few years and while her business grew the threshold did not ( until last year ) ..She has a spreadsheet which she updates daily and works to turning over around 7k a month .. I think the letter shook her up even though addressed to her seemed a generic mass produced one ..

Bookworm105

sidneyyoungblood said:

I think the letter shook her up even though addressed to her seemed a generic mass produced one ..

it will be generic as it will be driven by some algorithm making projections based on available (ie incomplete) data. HMRC computers have a history of being a tad inaccurate when extrapolating ... but the letter is for a purpose and your post on here shows the letter achieved the desired outcome, towhit she has checked her nearness to the threshold.

sidneyyoungblood

Just another a quick question ... ... their busy months are sept to feb where they  could take 90% of the sales for the year .. is it ok to make near the 90k in within these months or does it need to spread out over the 12 months ? 

 They were talking about stop selling from feb to august as it goes really quiet but still buying as they have been offered a part time job in the spring / summer which would earn them more than selling online would ..

Bookworm105

sidneyyoungblood said:

Just another a quick question ... ... their busy months are sept to feb where they  could take 90% of the sales for the year .. is it ok to make near the 90k in within these months or does it need to spread out over the 12 months ? 

 They were talking about stop selling from feb to august as it goes really quiet but still buying as they have been offered a part time job in the spring / summer which would earn them more than selling online would ..

she really should be educating herself over these sort of matters as, with great respect, you are asking simple questions whose answers are facts that can easily be looked up

VAT threshold is a rolling 12 month period 
How VAT works: VAT thresholds - GOV.UK