VAT registration avoidance

Firstly, let me start by making you aware that the turnover limit for VAT registration is for any consecutive twelve months; not the turnover during your accounting period nor the turnover in the tax year. Therefore, as you are getting close to the threshold, you must ensure you review this at least every month. Late registration can lead to penalties and interest.

In answer to your question, business activities cannot be ‘artificially separated’ in order to avoid VAT registration. And HM Revenue & Customs even go as far as to specifically list the bed and breakfast trade as a sector where artificial separation is a common tactic.

If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, you could even face prosecution. HM Revenue & Customs have also recently launched their VAT Initiative Campaign, which is essentially an amnesty for traders to come forward and admit they should have been VAT registered, so VAT is a hot topic at the moment.

If you are concerned about breaching the VAT registration threshold and the impact it would have on your business, contact your local TaxAssist Accountant for further advice.

Date published 5 Dec 2012

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.