Do you have to register for VAT if you go over £90,000?

If you go over £90,000, you might not automatically need to register for VAT, even though that's the standard registration threshold.

Here's why:

What is a VAT registration exception?

If you only temporarily exceed it, you may be able to apply for a VAT exception.

HMRC's VAT Notice 700/1 says you may not have to register if, at the end of any month, two things are both true: your taxable supplies went over the registration threshold in the last 12 months, and you can show HMRC that your taxable supplies will not go over the deregistration threshold in the next 12 months. HMRC calls this exception from registration.

The supplement to that notice gives the current registration threshold as £90,000 and the current deregistration limit as £88,000.

What does HMRC need to see?

Say you're a potato farmer and you make £100,000 one year, but you can show HMRC that your turnover is expected to stay below the £88,000 deregistration threshold over the next 12 months.

In that case, you can apply for an exception, meaning you don't need to register or start charging VAT on your supplies.

The figure HMRC looks at is taxable turnover, which its notice describes as the total value of all the taxable supplies you make, including the zero-rated ones. Exempt supplies are left out.

The exception only deals with turnover that has already happened. HMRC's VAT Registration Manual says a person whose supplies are expected to exceed the registration threshold in the next 30 days cannot be granted exception.

It is also a different thing from exemption from registration, which the notice describes separately. Exemption is for businesses whose supplies are all or mostly zero-rated.

How do you apply for an exception?

An exception is something you apply for. HMRC's notice says you will need to apply to make your exception official, and that you should send the application, with a full explanation, as early as possible.

HMRC's guidance says you cannot do this through the online registration service. You must use form VAT1 by post if you want to apply for a registration exception. The VAT Registration Manual adds that the application must be in writing: you contact HMRC to request a VAT1, say that the reason is an application for exception, and you are also sent form VAT5EXC. Both forms have to be completed and submitted together.

HMRC then considers the application and writes to confirm whether you have the exception.

What happens if HMRC refuses?

HMRC's guidance says that if you do not get the exception, they will register you for VAT. Notice 700/1 says that if HMRC is not satisfied that you meet the criteria, it will register you from the day you were liable, and you will need to account for VAT from that date.

Where the liability comes from going over the threshold in the last 12 months, HMRC's guidance says the effective date of registration is the first day of the second month after you went over. Applying late does not move that date.

The same guidance says that if you register late, you must pay VAT on any sales you have made since the date you should have registered, and that you might need to pay a penalty depending on how much you owe and how late the registration is.

Does an exception last?

No. Notice 700/1 says that being allowed exception does not mean you will never have to register, and tells you to keep checking the value of your taxable supplies every month to see whether you have gone over the threshold again. If you do become liable again, you can apply for another exception if you think it applies.

HMRC's manual makes the same point from the other side: granting exception does not create a cut-off date from which the calculation of any later liability starts again.

That's why it pays to monitor your revenue closely.

If you do end up registered, reclaiming VAT you paid before you registered covers what can be claimed back, and the VAT Flat Rate Scheme is one of the choices you will face. VAT for agencies covers the wider picture.

Thresholds and HMRC's process change, and whether an exception is available depends on your own turnover and what you can show about the next 12 months, so treat this as general information rather than advice on your own position. If your turnover is close to the threshold, talk to us or see how we work.