VAT amnesty: one month left to register
HM Customs and Excise have issued a reminder that there is just one month left in their amnesty for late registration.
As we reported earlier this year – see here:
VAT amnesty businesses, which have been late in registering for VAT, have until 30 September to register voluntarily without penalty. The penalty is waived, provided any VAT arrears are paid in full and all returns and payments are made on time for the next 12 months. A Customs and Excise spokesman estimates that the average business that has taken advantage of the amnesty has saved around £1000 in fines.
Businesses are required to register for VAT when the value of their taxable supplies in the past 12 months or less has exceeded the current VAT registration threshold of £56,000, or the value of their taxable supplies in the next 30 days alone is expected to exceed this threshold.
Customs and Excise say that "After 30th September we intend to crack down hard on those who have chosen not to take up this opportunity. Businesses who have deliberately not registered will have to pay the full penalties incurred on their arrears of tax for the time they should have been registered for VAT."
As with most amnesties it is most likely to appeal to those legitimate law-abiding businesses that have failed to register as a result of their turnover creeping over the limit. For these businesses the requirement to pay over all VAT due may not be too onerous, bearing in mind that VAT is only due on those sales made after the £56K of turnover in 12 months threshold is reached and that input tax after that date is deducted from the output tax due.
So, for example, if a freelancer has been billing £6K a month since setting their business up then they are only required to register at the end of their 10th month when their sales pass the £56K mark. If it is now the end of month 12, when sales have reached £72K, VAT of £2800 will be due on sales of £16000 less any deductible input VAT.
However, businesses that have deliberately failed to register for VAT and have operated for several years are far less likely to take advantage of the amnesty as their accumulated VAT debt will be substantial.