Late VAT Registration

VAT registrationI have only just prepared my accounts and I now realise that my business exceeded the VAT registration threshold. What happens now?

Amelia, St Albans 

You have to register for VAT if your sales in any twelve month period exceed the VAT registration threshold- currently £73,000. Please note the reference to any twelve month period; not necessarily your business’ year end.

So your first task is to work out the date when your turnover went over the threshold. Using this date, register for VAT with HM Revenue & Customs (HMRC) as soon as possible- which you can do online at www.hmrc.gov.uk or using form VAT1 which is available on the same website.

HMRC will then send you details of your VAT registration. But in the meantime, you should calculate the VAT due on your sales from the date you established above- even though you weren’t VAT registered at the time. However, you will be able to reclaim VAT on some of your business expenses. The net of these figures will need to be paid over to HMRC.

Please note, HMRC may also charge you a penalty for notifying them late.

Dealing with a backdated VAT registration can be difficult and there are particular rules about the VAT you can recover on your expenses. So if you would like some assistance with this, please feel free to contact your local TaxAssist Accountant.

We provide tax and accountancy services in St Albans and throughout the UK - http://www.taxassist.co.uk

Late VAT Registration

Late VAT RegistrationI didn’t realise I should’ve registered for VAT earlier in the year until recently when I was preparing my accounts. I read about a ‘VAT amnesty’ recently- does this apply to me?

Aidan, Ascot 

In July 2011, HM Revenue & Customs launched the VAT Initiative, which was for individuals and businesses that were trading above the VAT registration thresholds but had failed to register. Under the Initiative, traders would face reduced penalties if they came forward.

Sadly, traders wishing to make use of the Initiative should have notified HM Revenue & Customs by 30 September.

Having said that, HM Revenue & Customs encourage traders to come forward and declare any under paid tax, as they will be charged lower penalties than if HM Revenue & Customs catches them first.

If you would like some assistance with VAT registration and the preparation of your VAT returns, please feel free to contact your local TaxAssist Accountant.

We provide tax accountancy services in Ascot and throughout the UK. http://www.taxassist.co.uk

VAT registration avoidance

VAT registration avoidance

I’ve been running a bed and breakfast for a few years now, and my turnover to March was just over £60k. I therefore fear I may breach the VAT registration threshold soon, so could I split the business up and deem a portion of it to be my husband’s? My husband has a full-time job and does very little to help with the business.

Joe, Newport

Firstly, let me start by making you aware that the turnover limit for VAT registration is for any consecutive twelve months; not the turnover during your accounting period nor the turnover in the tax year. Therefore, as you are getting close to the threshold, you must ensure you review this at least every month. Late registration can lead to penalties and interest.

In answer to your question, business activities cannot be ‘artificially separated’ in order to avoid VAT registration. And HM Revenue & Customs even go as far as to specifically list the bed and breakfast trade as a sector where artificial separation is a common tactic.

If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, you could even face prosecution. HM Revenue & Customs have also recently launched their VAT Initiative Campaign, which is essentially an amnesty for traders to come forward and admit they should have been VAT registered, so VAT is a hot topic at the moment.

If you are concerned about breaching the VAT registration threshold and the impact it would have on your business, contact your local TaxAssist Accountant for further advice.

We provide tax accountancy services in Newport and throughout the UK. http://www.taxassist.co.uk

VAT on Electric and Gas

VAT on Electric and GasQ: I run a small shop. I have recently being reviewing my bills; looking for any possible savings. I noticed that sometimes my gas bills have VAT charged on them at 5% and other times the standard rate. Why does it fluctuate?

Tej, Hazel Grove

A: VAT on domestic use is normally charged at the reduced rate of 5% and for business use at the standard rate of 20%.

However, some businesses meet HMRC’s ‘de minimis’ rules and therefore, can have the reduce rate charged on their electric and gas supplies.

The low usage thresholds for common supplies are as follows:

• Electric - an average of 33 kWh per day during the bill period
• Gas - an average of 145 kWh per day during the bill period
• Deliveries of no more than 2,300 litres of fuel oil, gas oil or kerosene

If your business meets the above requirements, it will also qualify for exemption from being charged the Climate Change Levy (CCL).

Your supplier should charge you the correct rate of VAT and CCL. Don’t forget, if your business is not VAT registered, the VAT element is a cost to your business and therefore affects your profits and cashflow. Therefore, it is important that you ensure these are correctly calculated.

The guidance on this area is quite extensive and therefore, we would suggest you seek professional advice from your local TaxAssist Accountant if you have a query with your billing.

We provide tax accountancy services in Hazel Grove and throughout the UK.  http://www.taxassist.co.uk

Too Big to Cash Account

Too Big to Cash AccountQ: I am about to complete my VAT return for the quarter ended 31 March, and I fear that my turnover has crept to over £1.35m- which is the threshold for cash accounting for VAT. Despite best efforts, my customers are taking longer and longer to pay, so the VAT on my debtors is about £40k on average.

If I have to pay the VAT liability on an accruals basis, the bank account would exceed its overdraft limit and I've only just had a review so I don't think we'd get an extension. Is there anything we can do?

Joseph, Macclesfield

A: When you leave the cash accounting scheme, you may choose either to:

• Account for all your outstanding VAT due in the period in which you stop using the scheme. This may be simpler but could have a serious effect on your cash flow if the amounts of the VAT on your debtors is high
• Or opt for a further six months in which to account for the outstanding VAT.

Please note that you cannot opt for a further six months in which to account for the outstanding VAT if:

• HMRC has withdrawn use of the scheme from you, or
• The value of your taxable supplies has exceeded £1,600,000 and the value of your supplies made in the previous three months totalled more than £1,350,000
  If you want to make sure your business is running as tax efficiently as possible and making use of all the reliefs and allowances available to it, please feel free to contact your local TaxAssist Accountant for some advice.

We provide tax accountancy services in Macclesfield and throughout the UK.  http://www.taxassist.co.uk