My turnover has only increased each month over the past year and im now close to £80k annual turnover. I’m about to sign some contracts which will double my turnover or so. Just checking the rules of when i need to register and when VAT starts being charged.
Hi
VAT registration is either: (i) compulsory – historic or futuristic or (ii) Voluntary – existing or intending trader.
Historic – If your turnover (excluding exempt supplies) in the past 12 months (on a rolling 12-month basis) exceeds £85,000, you are required to register for VAT, must notify HMRC within 30 days. Notification to HRMC must be made within 30 days from the end of the month in which the registration threshold was exceeded. The registration will take effect from the first day of the second month when the limit was exceeded. For example, you exceed threshold in April, Must notify HMRC by 30 May, Effective date of registration will be 1 June.
Futuristic – If you believe that the value of taxable supplies in the next 30 days alone will exceed the VAT registration threshold, then the business must notify HMRC within 30 days.
The registration on this future test does, however, have an immediate effect. It means all supplies after the date the registration should be effective are deemed to include VAT, whether explicitly charged or not. This future test is really to catch substantial orders. For example, you sign a contract today that will see your turnover exceed £85,000, you must notify HMRC within 30 days from today and you must be registered for VAT from today. The VAT number will be issued later.
While it is tempting to issue VAT invoices with ‘VAT number applied for’ instead of a VAT number, this is technically in breach of the law. No mention can be made of the amount of VAT charged unless the trader is registered, and at the date of issue of the invoice, you are not.
Therefore you can’t charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period. You should increase your prices to allow for this without specifically stating that the amount charged is VAT and you tell your customers why. Once you’ve got your VAT number you can then reissue the invoices showing the VAT.