HMRC insisted that an individual register for VAT, but we successfully argued they were entitled to an exception from VAT registration.
When a person’s income figures, as declared for direct taxes, exceed the VAT registration threshold (2022: £85,000) HMRC’s systems flag this for review. HMRC decided that, as a sole trader, this person’s income had exceeded the VAT registration threshold and the individual should have been registered for VAT for many years. HMRC wanted to collect VAT on all income, stretching from the present back many years into the past. The total income over years was significant, as was the associated VAT liability.
While there is a cap restricting HMRC to the last 4 years only, this only applies when already registered for VAT. There is no cap when failing to register for VAT.
Kevin reviewed the correspondence with HMRC and analysed the amounts involved. He understood the technical position and coordinated a response to HMRC. He demonstrated that the individual was not required to be registered for VAT despite income exceeding VAT registration thresholds as an exception from registration. Kevin was able to quote specific rules and called for an immediate end to almost a year of stressful correspondence with HMRC. HMRC promptly agreed and closed their enquiry.
We share in our clients’ joy and relief at successful defences against incorrect HMRC pressure, and this client was kind enough to share her gratitude with us.
If you would like further information, or to discuss any queries, please contact us. We’d be delighted to help.
