If you don’t register for VAT or don’t understand how the system works, HMRC could penalize you severely, damaging your reputation.
The rolling 12-month period used in VAT registration rather than the tax year or calendar year might deceive people; therefore, monitoring your taxable sales every month if you’re approaching the threshold is essential.
What If You Forget to Register for Vat
Before we look at what might happen if you fail to register your business for VAT on time, when is the last date to do so?
- If your annual taxable sales exceed ยฃ85,000
- If you think your taxable sales will surpass the limit within the next month
Stay Ahead on VAT: Business Guides, Schemes, and Pre-Registration Explained
Penalty in Case of Failure to Notify
If you forget to register for VAT, the HMRC will charge you with a failure to notify. The amount of tax owed determines the penalty, which rises each day after registration is due. (There’s a minimum penalty of ยฃ50).
| How late was your VAT registration?ย | The penalty |
|---|---|
| Nine months or under | You will owe 5% of the total amount, in addition to what was supposed to be paid. |
| Between nine and 18 months late | On top of the amount you owe, an additional 10% for each missed payment. |
| Over 18 months | An additional 15% of what you owe, on top of your regular payment |
Penalty if you forgot the VAT registration
Civil Evasion Penalty
HMRC may conduct a Civil Evasion Tax Investigation if they have reasonable grounds to believe you’ve committed deliberate tax evasion and may impose a civil evasion penalty equal to the amount of VAT avoided.
This is very unlikely to happen since you have neglected to register, but it’s worth noting that HMRC has a wide range of powers when it comes to VAT. Another problem that affects your cash flow is your responsibility to settle the VAT you be indebted to from the date you should have registered, even though you will not charge it to clients on sales invoices during this time.
You have 30 days from the date you receive notification to appeal a VAT penalty. In some cases, HMRC will take mitigating circumstances into account and may reduce the penalty.
Late Payment of Vat
Late payment penalties are calculated as a percentage of the tax due and are presently set at 5%.
If you have a ‘reasonable excuse,’ HMRC may be willing to waive the penalties for failing to notify, late filing, and late payment. But what is considered ‘reasonable?’
Some Reasonable Excuses for Forgetting to Register for Vat
Did you know that if special circumstances arise, HMRC may agree to waive the penalties as mentioned earlier?ย
These are called ‘reasonable excuses’ and can be classified as either out-of-your-control events or unexpected occurrences. So what might be considered a reasonable excuse for forgetting to register for VAT?
For example:
- Serious illness of a family member or your severe sickness
- Bereavement
- There is legitimate uncertainty whether you are self-employed
- An authentic problem with HMRC’s online services
Dealing with HMRC may be intimidating, especially if you’ve made a mistake or failed to comply in some way.
Additional Resources
Conclusion
If you have yet to register for VAT, or if you’re unsure about how the system works, it’s best to seek professional help to ensure you don’t make any costly mistakes. The late filing and payment of VAT can result in severe penalties, so it’s important to stay on top of your obligations.
If you have any questions about VAT or need assistance with registration, please don’t hesitate to contact us. We would be happy to help!
Frequently Asked Questions About What Happens IF You Don’t Register for VAT
Is it compulsory to be VAT registered?
You need to register for VAT if your taxable turnover in ANY 12 months reaches the registration limitโit is not only the level of turnover in your 12-month accounting period that you must check.
How far back can you register for VAT?
You may allow traders to register for a period of no more than four years from the date the application is received, provided that the trader has an entitlement to registration for the entire duration. You should not usually allow retrospective registration to an earlier date.
Can I claim the VAT back if my turnover is less than 85000?
Only VAT-registered businesses, and those who charge it, can reclaim it. If your company turns over more than ยฃ85,000 of taxable items or services (i.e., those not exempt or zero-rated), you must register. You can still register for VAT if your turnover is less than this amount.
