HMRC Registration Letter

HMRC have recently started a one to many campaign in respect of VAT registration – these letters appear to be triggered where another tax return (Corporation Tax, Income Tax) has been submitted with a turnover above the VAT registration threshold (currently £90,000). The letters can be identified by the reference HEIPO2MM.

The language employed in these letters implies that where the threshold has been exceeded that the recipient must immediately register for VAT, with no regard to whether the turnover of the recipient does actually give rise to a registration requirement.

What to do if your client has received this letter?

If your client has received one of these letters then the liability of your clients turnover should be considered. Certain turnover does not contribute to the registration threshold, some of the common of these being:

• Supplies of services to overseas business
• Exempt supplies such as financial services, insurance, medical service, property etc
• Non business income such as donations or grants
• Sales of goods where the goods are located outside the UK at the time of sale

For these or any other income that would not be subject to VAT, you should ensure that all the conditions specific to the supply are met in order to qualify the income not counting towards the turnover threshold.

It should also be noted that zero rated turnover, which is separate from exempt, does count towards the registration threshold and can trigger the requirement to register, such as:

• Exports of goods from the UK
• Sales of goods from Northern Ireland to VAT registered person in the EU
• Food
• New build residential properties

Through if all income is zero rate, such that if VAT registered the client would be in a VAT repayment position, they can apply for an exemption from registration. This is a positive election and must be applied for separately with HMRC.

If on review the client’s taxable income (that is income that would be subject to VAT at the standard, reduced or zero rate if registered) is below the threshold, then no further action is required. The letter itself does not provide any contact details to send evidence or confirmation to and in general there is no legal requirement to inform HMRC if you are not required to register for VAT.

For more information, please contact us at: consultancy@vantagefeeprotect.com

Carl Tweedy
VAT Advisor