VAT Registration Threshold

It is compulsory for you to register for VAT in the UK if your VAT taxable turnover (all supplies of goods and services that are not exempt)exceeds, or will exceed the VAT Registration Threshold. This threshold is £85.000 from 1 April 2017. This is usually uplifted in the Budget each year to take effect from 1 April.

There are a number of tests business owners need to be aware of to determinate if they should be registered for VAT. These tests are 1. The next 30 days test and 2. The previuos12 month test

The next 30 days test

If you expect your taxable turnover to exceed the VAT  Registration Threshold in the next 30 days alone, you are required to register for VAT and charge VAT on your supplies immediately.

For example, say your business has been running for a few months but has only had a taxable turnover of around  £4000 per month. However, after a few months, a customer comes along and places an order for £100.000 and delivery will be made in two weeks time.

You know once you have accepted the order that your taxable turnover will exceed the VAT Registration Threshold within 30 days and you must, therefore, register immediately and you would charge VAT on that sale as well as all other sales moving forward.

If ,however, the goods were to be sold and delivered over a four month period, your monthly turnover would only be £25.000. In no 30 day period do you expect turnover to exceed £85.000 and therefore the 30-day test does not apply.

The previous 12-month test

If the “next 30 days test” does not apply then you just need to look at the “previous 12 month test”. At the end of each calendar month, you would total up the sales for each of the 12 previous months and if this exceeds the VAT Registration Threshold you must register for VAT within 30 days of the end of the month in which the  threshold was exceeded and charge VAT from 1st day of the second month in which it was exceeded