HMRC has announced that it will be launching a campaign to target businesses that are trading above the VAT threshold but have not yet registered for VAT.  The crackdown is intended to take place later this summer but we suggest that businesses check their turnover levels sooner rather than later.

At present, the VAT threshold is £73,000 turnover on a rolling annual basis, meaning the last 12 months. It also applies if turnover is expected to exceed the threshold in the next 30 days.

We find that it is the “rolling basis” that can catch out businesses, especially when turnover is growing quickly.  Too often business people only review their 12 month results at the end of their financial year which could be too late as the VAT threshold could already have been exceeded.  We strongly recommend that any business people who see their turnover growing swiftly should consider registering for VAT before they reach the threshold so that they are not in contravention of the rules and so avoid being liable to penalties. Registering for VAT does mean recovery of VAT incurred on costs, so it is not all bad news.

We recommend that our clients start to use an accounting software product (such as Xero) for record keeping so that rolling 12 month turnover figures can be easily monitored to determine when they exceed the VAT registration threshold.

Have you been in the position of approaching the VAT threshold and perhaps exceeding it?  What was your experience?