Failing to register for VAT
VAT
Failure to register when you should have may have devastating consequences, as HM Revenue and Customs may backdate your registration to the date you should have registered – and make you pay them a significant proportion of your sales income. In most businesses it will be too late to recover the VAT from the original customers and so paying the VAT bill will be costly..
Example: Adrian only realises that his turnover has gone over the VAT threshold after he has had his annual accounts prepared. He notifies the VAT office 18 months late that he exceeded the VAT threshold. His business sales in the 18 months were £110,000. His sales should have included VAT 20% .
Adrian could face a VAT bill of £18,333. This is based on treating the £110,000 as the VAT inclusive price, so the VAT is 20/120 x £110,000. He could also face a penalty.
For more details see http://www.hmrc.gov.uk/vat/start/register/register-late.htm
TaxAid Tip
Turnover for VAT registration is based on a rolling 12 month period total of the sales you have made. It is not based on your annual accounts turnover. This means that if you trade near the limit you need to check your turnover each month. If you wait until you get your accounts prepared you may register too late!
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