There are two factors to consider when working out whether you have exceeded the VAT registration threshold. The first is whether your taxable turnover exceeds the limit, and the second is determining at what point the VAT registration threshold was exceeded.
- Calculating taxable turnover – We now know that all businesses who earn over the threshold have an obligation to apply for VAT registration in the UK. But what does your taxable turnover account for? A business’ VAT taxable turnover includes the value of any goods or services which they supply within the UK, unless they are exempt from VAT. Companies must also include any zero-rated supplies. When calculating taxable turnover, you should not include the sale of any capital assets.
- Determining the date you exceed the VAT threshold – The crucial detail relating to the taxable turnover limit is that the 12-month period applies to any rolling 12-month period, and not necessarily to your accounting period, the tax year or the calendar year. Similarly, if you expect your VAT taxable turnover to surpass the VAT threshold in the next 30 days, you are also obliged to register.
What happens if you submit your return and payment late?
If you make a late submission, it is recorded as a ‘default’. HMRC records a default for two reasons: if they do not receive your VAT return by the deadline, or if the payment for the VAT due does not reach their account by the deadline. If this happens, you might enter a 12-month ‘surcharge’ period. If you default again during this period, HMRC extends the surcharge period for another 12 months, and you may have to pay a surcharge on top of the VAT that you owe.
You will not have to pay a surcharge for your first default. After this, the surcharge you pay depends on your annual turnover and the number of defaults you have made within 12 months. The surcharge equates to a percentage of the VAT that is unpaid at the due date. You can find the full rates on the government website.
If you submit your return late, you won’t have to pay the surcharge so long as you pay your VAT on time. You also won’t have to pay a surcharge if you have no tax to pay, or if HMRC owes you a refund.
