By law you MUST NOT charge VAT to your customers if you’re not VAT registered. If you are found to be charging VAT when you’re not registered to do so there will be consequences. The penalty given by HMRC can be upto 100% of the VAT shown on the invoice. If it happens to be a careless mistake a minimum penalty of 10% of the VAT can be enforced.

If you have mistakenly charged VAT when you’re not registered you must not hide this from HMRC, you must declare it as soon as possible as this will only make matters worse if you chose to cover up your error. You will need to explain to HMRC what you are doing to put this mistake right.

You must issue a credit note to your customer to show that you are returning the VAT to them and explain the reason for the error. 

If you wish to charge VAT and you have not reached the VAT threshold of £85,000 (the point in which you must become VAT registered) then you can register voluntarily. Until you have confirmation of registration (your VAT number) you must refrain from charging VAT. When you charge VAT you must display your VAT registration number on your documentation. 

Likewise if you have exceeded the VAT threshold of £85,000 and you are not charging VAT this can also land you in trouble with HMRC. If you know you will be reaching the VAT threshold within the next 30 days you must make HMRC aware. Your registered VAT date will come into play from the date you realised it was going to happen not the date it actually exceeded the threshold.

If you go over the threshold without expecting to do so you must register for VAT within 30 days of exceeding the limit. If you are late registering then you will be made to pay from when you should have registered and penalty fees will be applied. It’s in your best interests to register for VAT as soon as you are aware you will exceed the threshold. 

If you are unsure as to whether or not you should become VAT registered then please read our previous blog here and if you want extra reassurance please give us a call for some guidance.