VAT Q&A: how to re-register for VAT

In our regular Q&A series, Croner Taxwise VAT consultants explain the rules around re-registering a business for VAT after a period of time when turnover fell below the VAT threshold

Q. My client runs a café and de-registered for VAT back in May 2018 as they believed their turnover would not exceed the deregistration threshold of £83,000 over the following 12 months. This was due to a slump in trade following the opening of a popular competitor across the road.

Prior to this, the company had been VAT registered since January 2015 (more than 12 months).

As of December 2018, the turnover for the period June 2018 to December 2018 was £63,000, but the rolling 12-month turnover (Jan 2018 to Dec 2018) was back up to £93,000, as the shop across the road went out of business. Does this mean they have to re-register?

A. Under VAT registration rules, schedule 1, para 1(4) of Value Added Tax Act 1994 (VATA 1994) specifies that when considering a person’s taxable turnover to determine whether registration is required, any turnover from a previous period of registration should normally be excluded.

The exception to this would be where a trader misled or withheld relevant information from HMRC at the time of cancellation. For example, a trader deregistered for VAT on the grounds that their turnover would fall below the £83,000 deregistration limit over the following 12 months because they told HMRC that they were going to close their shop for an extra day per week, however the shop never closed.

In the cafe client’s case, while they are required to continue to monitor their 12-month rolling turnover, if they were VAT registered for 12 months or more, the only turnover that will count is that generated since they deregistered.

The income from the period of registration will be disregarded, and the company effectively has a fresh start for registration. However, they are still eligible to register voluntarily if they wish.

Confirmation of this can be found in HMRC’s Registration Manual, at VATREG18150.

If the company had been registered for less than 12 months, their rolling 12-month turnover would comprise turnover from prior to their period of VAT registration as well as that post-deregistration.

For example, if a business was registered from 1 November 2018 to 31 March 2019, at the end of Apr 2019 they would add their turnover from May to October 2018 to that from April 19, and so on, until the pre-registration sales fell out of time in October 2019.

About the author

Jason Croke is a VAT consultant at Croner Taxwise

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