Who does it affect?
- Most trading businesses except for those where exemptions are applied (e.g. education and training, healthcare).
- Furnished Holiday Letting income is deemed a trade and therefore does not fall within residential income (see below) and is NOT exempt.
- Some commercial property is opted to VAT so if this is the case then the VAT threshold applies.
Note:
Residential property income and some Commercial property income is VAT exempt which means even if you exceed the VAT threshold you are exempt from registering.
What is the current VAT Threshold?
You must register for VAT if, by the end of any month, your total VAT taxable turnover for the last 12 months (not your last financial year) was over £85,000.
When do I have to register by?
- If you believe you are going to go over the threshold with the next 30 days: You must register if you realise that your annual total VAT taxable turnover is going to go over the £85,000 threshold in the next 30 days.
You have to register by the end of that 30-day period. Your effective date of registration is the date you realised, not the date your turnover went over the threshold.
- If you have already gone over the threshold: You must register within 30 days of the end of the month when you went over the
threshold.
Your effective date of registration is the first day of the second month after you go over the threshold.
If I register do I have to charge VAT immediately?
- You cannot charge VAT until you receive your VAT Certificate. Currently, this can take 40 days or more after you first register.
Guidance from HMRC is that once you register you should adjust your prices as though you were charging VAT as you will need to submit a return for dates prior to receiving your VAT Certificate.
You should also keep all purchase invoices from the date you register or the date you went over the threshold, whichever is the sooner. This will also be included in your first submission.
Will you let me know if I am going to go over the Threshold when you complete my Annual Accounts or Tax Return?
- If, during the conversations we have with you when completing your annual accounts or tax return, we suspect there is a possibility that you will exceed the threshold then we will forewarn you to keep a close check on your turnover. However, Year End Accounts and Tax Returns are NOT a substitute for monthly bookkeeping. If you would like to discuss us providing you with this service, then please let us know and we will happily provide you with a quote.
What might change to make me go over the VAT Threshold?
- A number of factors affect turnover, however, be aware in particular of the following and keep a closer check on your 12 month rolling turnover:
Purchase of Short-Term Holiday Lets
Purchase of a commercial unit
Trading businesses take on a large contract.
Do you believe this may apply to you? Would you like to discuss your options with one of the team at Calculated?
If you need any assistance or would like to talk to one of the team, please contact us using the contact form on our website.
