Under VAT registration rules, schedule 1, paragraph 1(4) of VAT Act 1994 specifies that when considering a person’s taxable turnover to determine whether registration is required, any turnover from a previous period of registration should normally be excluded.
The exception to this would be where a trader misled or withheld relevant information from HMRC at the time of cancellation – for example, a trader deregistered for VAT on the grounds that their turnover would fall below the £83,000 deregistration limit over the following 12 months because they told HMRC that they were going to close their shop for an extra day per week, however the shop never intended to do so.
In your client’s case, this means that whilst they are required to continue to monitor their 12 months rolling turnover, if they were VAT registered for 12 months or more, the only turnover that will count is that generated since they deregistered. The income from the period of registration will be disregarded, and the client effectively has a fresh start for registration. However, your client is still eligible to register voluntarily if they wish.
Confirmation of this can be found in HMRC’s Registration Manual, at VATREG18150.
If your client had been registered for less than 12 months, their rolling 12 months turnover would comprise turnover from prior to their period of VAT registration as well as that post-deregistration. For example, if a business was registered from 1 November 18 to 31 March 19, at the end of April 19 they would add their turnover from May to October 18 to that from April 19, and so on, until the pre-registration sales fell out of time in October 19.
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If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at competitive rates.
