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What happens if you forget to register for VAT?

What happens if you forget to register for VAT?

Failing to register for VAT, whether you’ve simply forgotten or you don’t understand how the system works, can lead to severe penalties being imposed, as well as a poor reputation with HMRC.

One of the aspects of VAT registration is the rolling 12-month period that’s used rather than the tax year or calendar year, and this can catch people out, so keeping an eye on your taxable sales each month is crucial if you’re approaching the threshold.

If you forget to register for VAT

Before we look at what could happen if you don’t register your business for VAT at the right time, what is the deadline for registering?

  • When your annual taxable sales exceed £85,000
  • When you believe your taxable sales will go over the threshold in the next 30 days

Failure to notify penalty

Forgetting about VAT registration means you’ll be charged a failure to notify penalty by HMRC. This is based on how much VAT you owe, and increases the longer you take to register. (There’s a minimum penalty charge of £50).

  • Up to nine months late: 5%
  • Between nine and 18 months late: 10%
  • More than 18 months late: 15%

Civil evasion penalty

If HMRC have reasonable grounds to believe you’ve deliberately evaded your VAT liability they can undertake a Civil Evasion Tax Investigation and potentially impose a civil evasion penalty equal to the amount of VAT that’s been evaded.

This is unlikely to happen as you’ve simply forgotten to register, but it’s worth knowing the wide scope of powers HMRC hold where VAT is concerned. A further issue that affects cash flow is your liability to pay the VAT you owe from the date you should have registered, even though you won’t have charged it to customers on your sales invoices during this period.

You can appeal against a VAT penalty within 30 days from the date of notification. HMRC will consider certain mitigating circumstances, again on a case-by-case basis, and may reduce the penalty in some situations.

‘Reasonable excuses’ for forgetting VAT registration

HMRC may agree to waiver their penalties under certain circumstances – known as ‘reasonable excuses.’ Essentially, these are circumstances that are out of your control, or unexpected events, so what might be regarded as a reasonable excuse for forgetting to register for VAT?

Here are a few examples:

  • Your serious illness, or serious illness of a member of your family
  • Bereavement
  • Legitimate doubt as to whether you’re self-employed
  • A legitimate problem with HMRC online services

Dealing with HMRC can be daunting, especially when you’ve made a mistake or failed to comply in some way. If you’ve forgotten to register for VAT or need support in dealing with HMRC, Handpicked Accountants can put you in touch with a fully qualified accountant in your area. We provide referrals based on longstanding working relationships with accountants around the country – please contact one of the team to find out more.

David Tattersall
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Hi there - I'm David from Handpicked Accountants. If you need help finding the right accountant, simply give me a call. My expertise is in connecting business owners with the very best professional services and I'm on hand to assist you today.

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