What happens if I don’t register to VAT?

What happens if I don’t register to VAT?

Advice, Company Directors, Limited company, Tax

VAT must be paid on certain goods and services – which we’ve looked at before – but some people ask: What happens if you don’t register for VAT?

You must register for VAT if your turnover is higher than the government’s threshold (£85,000 at the moment) in a 12-month period. Beware, this is a rolling period rather than an accounting period.

So you must be aware of what your turnover is and if it looks like topping the threshold in the next 30 days, it’s wise to register now.

What if I don’t register for VAT?

Deciding not to register for VAT with HMRC could lead to you facing penalties. Fines are worked out on how much VAT you owe as well as on the lateness of your registration.

The VAT owed from the time you register will be added to your penalty, so being late could be an expensive exercise.

Not registering on time means you won’t have charged VAT on any taxable goods and services, so you’ll miss out. But HMRC will still expect you to pay your VAT bill, even though you didn’t collect it from customers.

You will receive a penalty for registering late – but that’s not all! You may also be charged a penalty for failing to notify HMRC. In some cases, you could face a civil evasion penalty.

Penalties for not registering for VAT

If your registration was late the penalties are as follows:

  • Nine months or under – 5% of what you owe on top of what should have been paid
  • Between 9 and 18 months late – 10% of what you owe on top of what should have been paid
  • Over 18 months – 15% of what you owe on top of what should have been paid

I’ve got a good excuse!

You may well have an excuse for failing to register for VAT – but is it a ‘reasonable excuse’? What that means is entirely up to HMRC, but if you think you’ve a reasonable explanation, then you can appeal.

If you’re the only person responsible for a business, for example, and you are unable to work through illness or a family emergency, HMRC may accept your reason.

HMRC looks at all cases individually. If they issue a penalty, you have 30 days from the start date on the letter to appeal the decision.

Our advice is to register for VAT as soon as your turnover starts heading towards £80,000. For more advice, contact us using the form below.