Registering for VAT
In this section:
- When you must register for VAT and when you can choose to register
- How to register for VAT
- Register for VAT or file your VAT return online
- VAT registration when you take over a business
- Registering for VAT as a group, division or joint venture
- Appointing someone to deal with your VAT affairs
- What happens if you register for VAT late?
- How long it takes to be registered and what to do in the meantime
- Reclaiming VAT on purchases made before VAT registration
What happens if you register for VAT late?
If your turnover is above the VAT registration threshold, currently £67,000, you must register for VAT. You must also register for VAT if you buy a VAT registered business.
If you do not register for VAT you will still be liable for the VAT due from the time that you should have registered. You may also be penalised financially. Your penalty will depend on how much VAT is payable, and how late your registration is. There are very few excuses that you can use to avoid these penalties.
On this page:
- Reminder: when you must register for VAT
- If you register for VAT late or do not register
- Late registration penalty: how much you may be charged
- Reasonable excuses for late VAT registration
- What is not a reasonable excuse for late VAT registration
- What are mitigating circumstances for late VAT registration
- What to do if you are penalised for late VAT registration
- More useful links
Reminder: when you must register for VAT
You must register for VAT if your turnover is above the VAT registration threshold which is currently £67,000. You must also register for VAT if you buy a VAT registered business as a going concern.
If all or most of the goods and services that you sell are zero-rated, you may apply to HM Revenue & Customs (HMRC) for an exemption from registration. HMRC may also excuse you from registering for VAT if you can show your future turnover will be below the registration threshold.
Find more information about when you must register for VAT
If you register for VAT late or do not register
If you do not register for VAT at the correct time, you will still be liable for all VAT due from the time that you should have been registered.
This means that you will have to pay HMRC for VAT on your sales from the date you should have been registered even though you have not have charged your customers VAT.
You may also be penalised financially.
Late registration penalty: how much you may be charged
There is a minimum penalty, currently £50, for any late VAT registration.
The total penalty you will pay is based on how much VAT is due from you, and how late you were in registering. The later you register, the higher the penalty you will pay.
HMRC will calculate how much VAT you owe from the date when you should have registered to either the date when HMRC receives your application, or the date HMRC becomes aware that you are required to be registered.
A percentage will then be applied to this figure to calculate your penalty. The percentages are based on how late you register. The current percentages are:
- 5 per cent if you registered less than nine months late
- 10 per cent if you registered 9 to 18 months late
- 15 per cent if you registered more than 18 months late
Example
If you owe £20,000 VAT and were 12 months late in registering, your penalty would be:
£20,000 x 10 per cent = £2,000
The total you would have to pay to HMRC would be:
£20,000 + £2,000 = £22,000
Get information about paying and reclaiming VAT
Find out what happens if you are late in registering for VAT and paying VAT
Reasonable excuses for late VAT registration
You may not be penalised for registering late if you can show HMRC that you had a 'reasonable excuse'. Based on your particular circumstances, a reasonable excuse could be:
- compassionate circumstances, for example where you are totally responsible for running your business and you or a family member was seriously ill
- where you have taken over a business as a going concern and have sent VAT returns and paid tax on time under the old VAT registration
- where you have doubts about whether your goods or services are within the scope of VAT and you have enquired in writing to HMRC
- where you are genuinely unsure whether you are self-employed or employed
Get information about registering for VAT when you buy a business
Get information about products and services where VAT is charged
Find out whether you are employed or self-employed
What is not a reasonable excuse for late VAT registration
HMRC will not accept excuses such as:
- you made a genuine mistake
- you were acting honestly and in good faith
- you cannot afford to pay the tax or the penalty
- you relied on someone else to register you for VAT
What are mitigating circumstances for late VAT registration
If you don't have a reasonable excuse, you may still be able to reduce your late registration penalty if you can show mitigating circumstances in your case.
HMRC will not accept reasons such as the following for mitigating circumstances:
- you were acting in good faith
- you cannot afford to pay the tax or the penalty
- that little or no tax has been lost
What to do if you are penalised for late VAT registration
In general, if you have been penalised you should pay up. However, if you disagree with being penalised or with the amount of your penalty, you may appeal.
Find out more about how to appeal
More useful links
Find out more about the late VAT registration penalty in VAT notice 700/41
More about if you need to register for VAT in VAT notice 700/1
