Hi Ed – you’ve got the right principle about VAT only being due on your standard rated (“VATable”) sales, not those that meet the criteria for a zero ratings. A couple more points to bear in mind:
The threshold is £85k and you’re required to notify HMRC within 30 days of the end of the month in which you exceed the threshold. Your registration effective date is then the first day of the month after that. For example – say you exceeded the threshold in May. You would have to notify HMRC by the end of June (30 days after the end of May), and VAT would only apply to turnover from 1 July. So, depending upon when in May you exceeded the £85k, there’s an additional one to (nearly) two months’ worth of turnover that won’t be subject to any VAT. You only need to look at your turnover since the effective date of your registration, calculated as above.
VAT is 20% of a VAT-exclusive amount (the “net” amount), not the amount you received from your customers (the “gross” amount). Assuming that you’re not able to go back to your customers and charge them an extra 20%, the VAT that you’ll need to pay HMRC is only 1/6th (20/120ths) of the income, not 20% of it. For example, if £12k of the turnover you’ve received since the date you should have been registered relates to standard rated sales, you owe HMRC £2k, not £2.4k. This is because the £12k is £10k net turnover + 20% VAT.
Having said that, who are your customers? If they are VAT registered businesses, they may well be able to reclaim any VAT that you charge them – so might be prepared to pay you an extra 20% on a VAT-only invoice once you’re registered.
Finally, once registered you will be able to reclaim VAT on your business expenditure – in relation to both standard and zero rated sales. There is also the potential to reclaim VAT on some expenses incurred prior to your registration – general limits are services up to 6 months pre-registration, and goods up to four years pre-registration provided that they are still owned by your business. Obviously your accountant will go through this in greater detail with you, but if there is a delay before you can see them, it would be worth making sure that you’ve got documentation to support these pre-registration purchases (e.g. invoices from your suppliers) to hand.