Not Registered for VAT? Guide to Avoid Penalties

Introduction: In the intricate landscape of UK taxation, the importance of timely VAT registration cannot be overstated. This article delves into the repercussions of businesses not registered for VAT, shedding light on late registration penalties and potential civil evasion investigations by HMRC.

Not Registered for VAT – Late Registration Penalties

If your business exceeds the annual taxable s1ales threshold of £85,000 or is expected to do so in the next month, VAT registration is mandatory. Failure to register on time can lead to severe consequences.

Late VAT Registration Penalties

When it comes to late VAT registration, the penalties are structured based on the duration of the delay:

  • Nine months or under: A penalty of 5% of the total amount owed, in addition to the original sum.
  • Between nine and 18 months late: An extra 10% for each missed payment on top of the owed amount.
  • Over 18 months: An additional 15% of the outstanding sum, in addition to the regular payment.

Civil Evasion Penalty

In cases of deliberate tax evasion, HMRC may conduct a Civil Evasion Tax Investigation, potentially resulting in a penalty equal to the avoided VAT amount. While this is uncommon, it underscores HMRC’s authority in VAT matters.

Late Payment of VAT

Late payment penalties are set at 5% of the tax due. However, HMRC may consider waiving penalties if a ‘reasonable excuse’ is presented.

Reasonable Excuses for Late VAT Registration

Special circumstances may warrant the waiver of penalties. ‘Reasonable excuses’ can include events beyond your control or unexpected occurrences:

  • Serious illness of a family member or personal illness.
  • Bereavement.
  • Legitimate uncertainty about self-employment.
  • Technical issues with HMRC’s online services.

Conclusion: Seek Professional Guidance

To avoid costly mistakes, businesses not yet registered for VAT or unsure about the system are advised to seek professional assistance. Late filing and payment of VAT can result in severe penalties, making it crucial to stay compliant with obligations.

For queries or assistance with VAT registration, feel free to contact us. We are here to help!

Frequently Asked Questions About Not Registering for VAT

1. Is it compulsory to be VAT registered?

  • You must register for VAT if your taxable turnover in any 12 months reaches the registration limit.

2. How far back can you register for VAT?

  • Traders can register for a period of up to four years from the date of application, provided they have entitlement for the entire duration.

3. Can I claim VAT back if my turnover is less than £85,000?

  • Only VAT-registered businesses and those charging VAT can reclaim it. If your turnover exceeds £85,000, registration is mandatory.

In summary, understanding the implications of not registering for VAT and staying informed about the registration process is essential for businesses to navigate the UK tax system successfully.

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