In general, a business must register for VAT where: 

• its taxable turnover for the last 12 months exceeds the VAT registration threshold (£90,000); or
• its taxable turnover for the next 30 days is expected to exceed £90,000.  

It is possible to register for VAT voluntarily.

HMRC is writing to non-VAT registered businesses where its records show that the business’s turnover has exceeded £90,000. The letter asks the business to check if they need to register for VAT and to register for VAT if they are required to do so. A business that registers for VAT late will need to pay VAT on any sales since the date it should have registered, plus interest. HMRC may also charge a penalty. 

HMRC says that it will monitor the business’s response to the letter. A business that receives a letter and does not register for VAT where it is required to do so, may face a penalty of up to 100% of potential lost revenue.  

ICAEW’s Tax Faculty is concerned that a business receiving a letter may assume that it is required to register for VAT and not check its position before registering. As the letter acknowledges, there are circumstances in which a business with turnover in excess of £90,000 may not be required to register for VAT. These include the following: 

• Where the figure for turnover given in the letter includes exempt supplies or supplies that are outside the scope of VAT (ie, where turnover exceeds £90,000 but taxable turnover does not). Taxable turnover is the total value of all goods and services a business supplies that are subject to VAT. This includes zero-rated supplies, even though no VAT is charged on them. It does not include exempt supplies or supplies that are outside the scope of VAT.
• Where the turnover figure quoted by HMRC is for a period longer than 12 months. 
• Where an exemption from registration applies (broadly, because the business makes mainly or wholly zero-rated supplies).
• Where the business has gone over the registration threshold temporarily.

Therefore, it is important that the business reviews its position before registering for VAT. Where the business finds that it is required to register for VAT, it should do so without delay.