Chapter 14 Registration Flashcards
14.1 Introduction
A business making taxable supplies will be required to register by HMRC if either:
• The value of taxable supplies made in the previous 12 months exceeds the VAT registration threshold, or
• At any time there are reasonable grounds for believing the value of taxable supplies to be made in the next 30 days on their own will exceed the VAT registration threshold.
The threshold is currently £85,000. Taxable supplies means supplies which are taxable at the standard, reduced or zero rate of VAT. Any business with taxable turnover below the threshold can voluntarily register, they may do this for a number of reasons:
• Credibility
• To recover input VAT
• To avoid late registration penalties
The disadvantages are:
• Output VAT will be charged on all sales liable to VAT at the standard or reduced rate
• VAT accounting is required
14.2 Types of registration
Compulsory registration is broken down into the historic test and the future test.
Historic test – the business looks at taxable supplies in the previous 12 months, if the taxable supplies have exceeded the threshold, they have to register. HMRC must be notified within 30 days from the end of the month the threshold has been breached, this is done by submitting a VAT 1 or via the online service. The business then charges VAT on supplies from the first day of the following month.
The future test – the business looks forward 30 days, if taxable supplies in the next 30 days are expected to alone exceed the threshold they have to register. Notification must be done within 30 days of the day the trader realizes the supplies will exceed the threshold. Registration has immediate effect and must charge VAT straight away.
14.6 Taxable Supplies
This is a supply of goods made in the UK other than an exempt supply. In determining registration it is necessary to take into account the VAT exclusive value of all standard, reduced and zero-rated supplies of goods and services. Supplies of capital assets of the business are disregarded. Exempt supplies are not included in the registration test.
14.7 Deregistration
A business can deregister either voluntarily or compulsory deregistration can occur. Compulsory deregistration occurs when a business is sold, changes status or ceases to make taxable supplies. Voluntary deregistration occurs when the business is expected to make taxable supplies of less than £83,000.
When deregistering VAT must be accounted for on any assets forming part of the business assets which are no hand at the last day of registration unless the VAT of the deemed supply is less than £1,000. This charge is known as a deemed supply.
14.8 Exemption from registration
Where a person makes taxable supplies that are zero-rated, they may grant exemption from registration.
14.9 Pre-registration input tax
Where:
Goods acquired for the business (within the previous 4 years) are still owned at the date of registration or services are supplied for the purpose of the business in the six months prior to registration, input tax can be recovered on a trader’s first VAT return once they have registered for VAT.
