According to recent research, a third of the UK’s smallest businesses are unaware of the rules governing VAT thresholds.
This lack of understanding means that around 780,000 businesses are at risk of being fined by HM Revenue & Customs (HMRC).
Meanwhile, according to the research, 27% of small businesses intentionally limit their trading in order to avoid reaching the VAT threshold.
Under the current rules, you must register for VAT if:
- Your VAT taxable turnover is more than £82,000 (the ‘threshold’) in a 12 month period
- You receive goods in the UK from the EU worth more than £82,000
- You expect to go over the threshold in a single 30 day period
Failure to register for VAT at the appropriate time will result in the business being penalised by HMRC. The penalty payable is worked out as a percentage of the VAT due from the date when you should have registered to the date when HMRC receives your notification or becomes aware that you should be registered and are not.
The minimum penalty is £50, the penalty rate will then depend on how late you are registering:
|If you registered||Then the penalty rate will be|
|Not more than 9 months late||5%|
|More than 9 months but not more than 18 months late||10%|
|More than 18 months late||15%|
These penalties are catching many small businesses out, yet they are easily avoiding by simply monitoring your turnover.
We can assist with all of your VAT needs – please contact us for further information and assistance.