Chapter 29 Value added tax (1)

29.6
(a)/(b)
A person should register for VAT as soon as the value of that person's taxable supplies for the year
ended on the last day of any month exceeds the registration threshold (83,000 as from 1 April
2016). HM Revenue and Customs should be notified within 30 days of the end of the month in
question. Registration will usually take effect as from the beginning of the next month but one.
Registration is not required if HMRC is satisfied that taxable turnover during the next 12 months
will not exceed the deregistration threshold (81,000 from 1 April 2016).
Registration is also required if there are reasonable grounds for believing (at any time) that taxable
turnover during the next 30 days alone will exceed the registration threshold. In this case, HMRC
should be notified no later than at the end of the 30-day period and registration will take effect as
from the beginning of that period.
(a) One consequence of failing to register is that the person concerned becomes personally liable
for the output tax which should have been charged to customers since the date on which
registration should have occurred, and it may well be impossible to recover this VAT in
retrospect from the customers. A further consequence is that the person will become liable to
certain penalties (see Chapter 30).
(b) Voluntary deregistration is allowed if HMRC is satisfied that the person's taxable turnover
will not exceed the deregistration threshold (81,000 from 1 April 2016) in the next 12 months.
Compulsory deregistration occurs when a registered person entirely ceases to make taxable
supplies or when a change of legal status occurs.
(c) A person whose taxable supplies do not exceed the registration threshold may register for
VAT voluntarily. This means that output tax must be charged to customers but it enables the
person concerned to recover input tax. If the person's supplies are mainly zero-rated or are made
mainly to customers who are themselves taxable persons, the fact that output tax must be charged
may not deter customers.

29.7
(a) A taxable person is a person who is making taxable supplies and who is (or should be)
registered for VAT. Persons must register if their turnover of taxable items exceeds the
registration threshold and might register voluntarily even if turnover is below the threshold. The
term "person" can refer to an individual, partnership, company or to any other body which
supplies goods or services in the course of business.
(b) Registration is compulsory when the person's taxable turnover for the previous 12 months
exceeds the registration threshold (83,000 from 1 April 2016). Registration is also compulsory
if there are grounds for believing that taxable turnover in the next 30 days alone will exceed the
threshold.
Some persons may choose to register voluntarily so as to recover input tax. This may be the case if
the person pays substantial amounts of input tax and believes that charging output tax to
customers would not trigger a loss of custom (e.g. if the person supplies only zero-rated items or
makes supplies wholly or mainly to customers who are VAT-registered). Another reason to
register voluntarily is to give the impression of an established business.
(c) Sanjay's cumulative taxable turnover for the 12 months to date (ignoring sales of non-current
assets) is as follows:
2016 2017
February 2,550 January 75,040
March 6,210 February 80,410
April 10,090 March 83,530
May 14,330 April 84,750
June 19,190 May 85,400
July 24,480
August 29,910
September 36,230
October 43,640
November 52,690
December 64,960

The registration threshold is passed at the end of March 2017. Sanjay must notify HMRC of this
fact by 30 April 2017 and registration will probably take effect as from 1 May 2017. However,
registration will not be required if Sanjay can convince HMRC that his turnover for the 12
months to 31 March 2018 is unlikely to exceed the deregistration threshold (81,000 from 1
April 2016).
(d) If a trade discount is given, output tax is based upon the price charged to the customer after
this discount has been deducted. As regards cash discounts offered for prompt payment, the
situation as from 1 April 2015 is that output tax is based upon the price charged to the customer
less any cash discount of which the customer takes advantage. Any cash discounts of which the
customer does not take advantage are ignored.