HMRC has published new guidance which sets out how to apply for VAT registration exception if a business has temporarily exceeded the VAT registration threshold of £90,000 in any 12-month period (a rolling calculation).
What is registration exception?
If a business has a one-off increase in income it can apply for a registration exception. If its taxable turnover goes over the threshold temporarily it can write to HMRC with evidence showing why the taxable turnover will not exceed the deregistration threshold (currently £88,000 in the next 12 months). HMRC will consider an exception and write confirming if a business will receive one. If not, HMRC will compulsorily register the business for VAT. A business will need to formally apply to HMRC to make this exception official.
The guidance explains:
- when to apply
- how to apply
- what happens after the application
Forms
A business will need to complete forms VAT1 and VAT5EXC in order to apply for registration exception. HMRC will write to the applicant within 40 working days of receipt with a decision.
If HMRC approves the application for exception
HMRC will not register the business for VAT. However, this is a ‘one-off’ and does not mean that the business will never have to register.
The value of taxable supplies must be checked every month, to establish whether they have exceeded the registration threshold. If they have, the business must:
- register for VAT
- apply for exception again
If HMRC refuses the application for exception
The response letter will explain why, and the information provided on the form VAT 1 will be used to VAT register the business. The applicant will need to account for VAT from the date it was liable.