VAT threshold regulations


S

Stuart Tanner

I have a specific query and wondered if someone might know the answer.

Regarding the law that requires one to register for VAT

Does the law require you to register for VAT if your "prorata" turnover is
greater than the prorata threshold even if you don't believe your business
will exceed the threshold for the year end. This may be the case with a
business that has a seasonal burst.

Summer maybe exceeding the monthly "prorata" VAT threshold but then reduces
to not exceed the total yearly VAT threshold.

In this case does the law require you to register?

Or conversely does the law require you to register explicity when you
*exceed* or are about to *exceed* the VAT threshold.

As in my particular case as it looks as though I will more than likely be
purchasing a business with a less than VAT threshold to it, I prefer to
remain non VAT registered as it is a retail bike business.
 
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J

Jonathan Bryce

Stuart said:
I have a specific query and wondered if someone might know the answer.

Regarding the law that requires one to register for VAT

Does the law require you to register for VAT if your "prorata" turnover
is greater than the prorata threshold even if you don't believe your
business will exceed the threshold for the year end. This may be the case
with a business that has a seasonal burst.
If your taxable turnover in the last 12 months exceeds the threshold, you
have to register.

If you expect your taxable turnover to exceed the threshold in the next 30
days alone, you have to register.
 
P

Peter Saxton

I have a specific query and wondered if someone might know the answer.

Regarding the law that requires one to register for VAT

Does the law require you to register for VAT if your "prorata" turnover is
greater than the prorata threshold even if you don't believe your business
will exceed the threshold for the year end. This may be the case with a
business that has a seasonal burst.

Summer maybe exceeding the monthly "prorata" VAT threshold but then reduces
to not exceed the total yearly VAT threshold.

In this case does the law require you to register?

Or conversely does the law require you to register explicity when you
*exceed* or are about to *exceed* the VAT threshold.

As in my particular case as it looks as though I will more than likely be
purchasing a business with a less than VAT threshold to it, I prefer to
remain non VAT registered as it is a retail bike business.
What is this "prorata"?
 
S

Stuart Tanner

Peter Saxton said:
On Sat, 3 Apr 2004 17:47:31 +0100, "Stuart Tanner"

What is this "prorata"?
Perhaps it is spelt Pro Rata. I mean as in a "pro rata" basis as in averaged
out over a period of time. I assume this is the correct definition that I
have been using it in context with.
If you take a loan and average payments out on a pro rata basis etc.etc.etc.
 
P

Peter Saxton

Perhaps it is spelt Pro Rata. I mean as in a "pro rata" basis as in averaged
out over a period of time. I assume this is the correct definition that I
have been using it in context with.
If you take a loan and average payments out on a pro rata basis etc.etc.etc.
But the VAT rules do not deal with pro rata.
 
S

Stuart Tanner

Jonathan Bryce said:
Stuart Tanner wrote:
If your taxable turnover in the last 12 months exceeds the threshold, you
have to register.

If you expect your taxable turnover to exceed the threshold in the next 30
days alone, you have to register.
Thanks for that. It seems quite unambiguously straightforward.
 
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B

BT

Jonathan Bryce said:
If your taxable turnover in the last 12 months exceeds the threshold, you
have to register.
I agree with this.
If you expect your taxable turnover to exceed the threshold in the next 30
days alone, you have to register.
This isn't quite as clear as it could be. The rules actually say
you have to register if you expect the value of your taxable
supplies in the next thirty days will exceed the threshold, i.e.
starting at zero you expect to make supplies with a value of more
than £58k.

I've only added this clarification because I read your comment as
suggesting that if your turnover up to now had been say £50k, and
you expected to make another £9k, say, in the next thirty days
you'd have to register.


--
Robert Killington
visit www.vatark.co.uk
for help with VAT

To e-mail me please do so via my website.
 
S

Stuart Tanner

BT said:
This isn't quite as clear as it could be. The rules actually say
you have to register if you expect the value of your taxable
supplies in the next thirty days will exceed the threshold,
Presumably that means the running total threshold ie. at month 10 you are
having turned over £57.5K.
I've only added this clarification because I read your comment as
suggesting that if your turnover up to now had been say £50k, and
you expected to make another £9k, say, in the next thirty days
you'd have to register.
--
Robert Killington
visit www.vatark.co.uk
for help with VAT

To e-mail me please do so via my website.
Thanks for the clarification Robert.
 
T

Troy Steadman

Stuart Tanner said:
Presumably that means the running total threshold ie. at month 10 you are
having turned over £57.5K.
Stuart *that* isn't quite as clear as it could be either. Every 12
months you add up the total for the previous 12 months and do the test.
If you have less than £56k turnover (not £58k) you can deregister, but
if you then go back up to £58k you have to reregister so it is unlikely
to be much use to you.

Don't forget in your case the £56k *includes* VAT so if your 12 months
accounts show currently £47,660 or better you cannot deregister (yet).


--
 
R

Ronald Raygun

Troy said:
Stuart *that* isn't quite as clear as it could be either. Every 12
months you add up the total for the previous 12 months and do the test.
I wouldn't have thought that's correct. The subtle difference between
12 months and a year is that you have to do the test every month, not
every year. Suppose you start a new business, and its turnover is £2k
in month 1, £4k in months 2, and continues to ramp up linearly, so that
each month's turnover is £2k more than the previous month's. Then the
"turnover in last 12 months" figure will stand at £42k after month 6,
£56k after month 7, and the threshold will be breached during month 8,
so you must register in month 9, you can't wait until month 13.
 
T

Troy Steadman

I wouldn't have thought that's correct. The subtle difference between
12 months and a year is that you have to do the test every month, not
every year. Suppose you start a new business, and its turnover is £2k
in month 1, £4k in months 2, and continues to ramp up linearly, so that
each month's turnover is £2k more than the previous month's. Then the
"turnover in last 12 months" figure will stand at £42k after month 6,
£56k after month 7, and the threshold will be breached during month 8,
so you must register in month 9, you can't wait until month 13.
Good grief I know that and that is what I intended to say. Every *month*
you add up the total for the previous 12 months and do the test...

But Ronald you are wrong here. If you breach the threshold during
month 8 you must notify HMC&E during month 9, but (to quote HMC&E):

"Your registration date will be the...first day of the second month
after your taxable supplies went over the registration threshold"

ie month 10. So tirez that in votre pipe.

http://www.hmce.gov.uk/forms/notices/700-01cs.htm#P198_14650

There is also a little-known exception to the rule IIRC where an
exceptional one-off sale (eg a builder gets *one* big contract) which
throws a trader over the threshold but cannot be expected to
recur, is not sufficient to mean automatic Registration.




--
 
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R

Ronald Raygun

Troy said:
Good grief I know that and that is what I intended to say. Every *month*
you add up the total for the previous 12 months and do the test...

But Ronald you are wrong here. If you breach the threshold during
month 8 you must notify HMC&E during month 9,
which is exactly what I said, so I'm *not* wrong.
but (to quote HMC&E):

"Your registration date will be the...first day of the second month
after your taxable supplies went over the registration threshold"

ie month 10. So tirez that in votre pipe.
When the registration becomes effective is irrelevant. The
question was when you must "register" (which in this context
means "apply to become registered").
There is also a little-known exception to the rule IIRC where an
exceptional one-off sale (eg a builder gets *one* big contract) which
throws a trader over the threshold but cannot be expected to
recur, is not sufficient to mean automatic Registration.
Interesting. Would that apply even if otherwise the "next 30 days"
rule would be invoked? E.g. if the one-off contract alone would be
for say £55k and "normal" turnover is around £4k a month? Would
the expected non-recurrence, coupled with the fact "normal" annual
turnover is below threshold do away with the requirement to register?

And, er, how often does the impossible (OK, the improbable) need to
happen before it "can be expected to recur"? :)
 
T

Tim

But Ronald you are wrong here.
Eh?

If you breach the threshold during month 8
you must notify HMC&E during month 9,
Yes, that's what RR said.

... but (to quote HMC&E):

"Your registration date will be the...first day of the second month
after your taxable supplies went over the registration threshold"

ie month 10. So tirez that in votre pipe.
Yes, exactly. But RR didn't say when the registration would begin from, did
he? ;-)
 
P

Peter Saxton

Eh?


Yes, that's what RR said.


Yes, exactly. But RR didn't say when the registration would begin from, did
he? ;-)
Are you being a troublemaker or a referee? :)
 
T

Troy Steadman

which is exactly what I said, so I'm *not* wrong.
...unless month 9 is February in which case you can notify them in
month 10..
When the registration becomes effective is irrelevant. The
question was when you must "register" (which in this context
means "apply to become registered").
You are saying you can register for VAT before the registration
date? I suppose that means you can register for death while you are
still alive?
Interesting. Would that apply even if otherwise the "next 30 days"
rule would be invoked? E.g. if the one-off contract alone would be
for say £55k and "normal" turnover is around £4k a month? Would
the expected non-recurrence, coupled with the fact "normal" annual
turnover is below threshold do away with the requirement to register?
Bxgger, I was hoping you'd say, "Yes I know all about that it happens
all the time!" Now I suppose I'll have to go and find some evidence,
otherwise all that priceless credibility I've built up will be
tarnished.
And, er, how often does the impossible (OK, the improbable) need to
happen before it "can be expected to recur"? :)
Indeed.




--
 
T

Troy Steadman

Eh?


Yes, that's what RR said.
A lamentable decline in standards of English literacy amongst
accountants is to be be deplored - I blame the schools!

Form VAT1 is an "Application for Registration" so if Ronald had said
*apply* to be registered during month 9 instead of *register* he would
have been right (and you would have been correct to defend him), instead
of being wrong and dragging you down with him into the literary
mire/morass.





--
 
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R

Ronald Raygun

Troy said:
..unless month 9 is February in which case you can notify them in
month 10..
Why's that then, because it doesn't have a 30th? Vous tirez ma jambe!
You are saying you can register for VAT before the registration
date?
For God's sake man, pull yourself together. We're talking about
what the shopkeeper is obliged to do. You don't register yourself.
The nice people at the VAT office do that. Your obligation is
simply to ask them.
I suppose that means you can register for death while you are
still alive?
Well, if you haven't bought your coffin before you've died, it'll
too late and someone else will have to do it for you. And you
might not like the colour. Then you'd really be stuffed.
Bxgger, I was hoping you'd say, "Yes I know all about that it happens
all the time!" Now I suppose I'll have to go and find some evidence,
I feel another masterclass coming on. Where are the smelling-salts?
otherwise all that priceless credibility I've built up will be
tarnished.
Credibility? I'm incredulous.

Tarnished? I'll have you know that a good reputation takes as
long to build as does a decent patina on a copper dome. Your
credibility's worthless *until* it's tarnished. :)
 
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T

Troy Steadman

Ronald Raygun said:
Why's that then, because it doesn't have a 30th? Vous tirez ma jambe!
"...you must notify to us within 30 days from the end of the month..."
I feel another masterclass coming on. Where are the smelling-salts?


Credibility? I'm incredulous.

Tarnished? I'll have you know that a good reputation takes as
long to build as does a decent patina on a copper dome. Your
credibility's worthless *until* it's tarnished. :)
Here we go then:

2.2 Do I have to register if I have reached the limits but I expect
the value of my taxable supplies to reduce?

If at the end of any month the value of your taxable supplies for the
last 12 months has gone over the registration threshold, but you can
provide evidence and explain why the value of your taxable supplies
will not go over the deregistration threshold in the next 12 months,
then you may not have to register, unless you are otherwise required
to do so because of the level of your distance sales or acquisitions.
This is called exception from registration.

You must still tell our National Registration Service that you have
reached the limit within 30 days of the end of that month, but you
will not have to fill in any forms.

If you are granted exception from registration you do not become
immune from a liability to register with regards to the supplies you
continue to make. You should continue to monitor the value of your
taxable supplies on a monthly basis to determine if a further
liability arises. You should still monitor your previous turnover even
where you were previously granted exception, as this does not form a
cut-off date for monitoring your turnover. If a further liability
arises you will have to apply again for exception.

http://www.hmce.gov.uk/forms/notices/700-01cs.htm#P198_14650
 
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