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VAT Registration

Many people ask me the same kinds of questions about VAT registration and what it boils down to are these two FAQs:

1. When do I need to register?

2. What’s the sales I need to have to register?

The answer to the first question is the easiest: when your sales exceed the registration threshold of £70,000 or if you expect your turnover in the next 30 days to exceed £70,000.

Second question is a little more complicated.

Many businesses look at their turnover (or sales) on a calendar year basis. So for a business that has a year end of 31/05/10, some business owners might look at their turnover for that year – say it is £65,000 – and compare that with the registration threshold of £70,000 and reach a view that they don’t need to register. They MAY be right.

Month
11,0008,000
22,5005,000
33,0005,000
47,0006,300
58,0006,300
66,0007,500
74,0004,800
85,0004,750
96,5004,950
104,30010,000
114,8008,000
129,0006,750
Total61,10077,350

On the basis of an annual calculation, you would only be registering at the end of April 2010, which is when THIS year’s turnover went above £70,000.

But VAT registration is based on moving average turnover….

MonthMonthly sales12 months average
11,0001,000
22,5003,500
33,0006,500
47,00013,500
58,00021,500
66,00027,500
74,00031,500
85,00036,500
96,50043,000
104,30047,300
114,80052,100
129,00061,100
1800068,100
25,00070,600
35,00072,600
46,30071,900
56,30070,200
67,50071,700
74,80072,500
84,75072,250
94,95070,700
1010,00076,400
118,00079,600
126,75077,350
77,350
77,350

The right hand column istheimportant one, and you can see that the business would have passed the threshhold (assuming it was £70,000) back in July 2009. It wont surprise you to know that the VAT that ought to have been charged needs to be paid to HMRC and if you’re in Retail it might be a little tricky collecting that from your customers!

Oh, and by the way there are some penalties for late registration as well.

So you can see it’s fairly important to get this right and done at the right time.

Just thought you should know….

JohnF

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