VAT letters

We’ve seen a rise in the number of SMEs telling us they have received a letter from HMRC about exceeding the VAT registration threshold.

Businesses must register for VAT if taxable turnover exceeds £90,000 in any rolling 12-month period. Taxable turnover includes standard-rated sales, reduced-rated sales and zero-rated sales, but it excludes VAT-exempt income and income outside the scope of VAT.

A common misunderstanding is that this applies to the accounting year, when in reality it is assessed month by month.

If you’ve received one of these letters, it’s really important you check your turnover carefully. If VAT registration is required, businesses may need to backdate registration and account for VAT on earlier sales. Equally, if you believe HMRC’s assessment is incorrect, it is important not to ignore the letter. Having clear records and supporting evidence available will help support your position should HMRC request further information.