ACCA Applied Skills · Taxation (UK)

The VAT registration requirements: formula sheet

Full chapter guide

Key formulas

Taxable supplies: Taxable supplies = standard-rated + reduced-rated + zero-rated; Exempt and outside-the-scope supplies are excluded.
Standard rate of VAT: 20%; Given in the tax rates and allowances in the exam.
Compulsory registration limit: Taxable supplies over £90,000; Deregistration limit is £88,000. Both are provided in the exam.
Zero-rated vs exempt: Zero-rated: 0% output VAT, input VAT recoverable. Exempt: no output VAT, input VAT generally not recoverable; Learn this contrast. It is tested often.
VAT-exclusive and VAT-inclusive prices: VAT = VAT-inclusive price × 20/120; VAT-exclusive price × 20%; Use when a standard-rated price is given including VAT.
Registration limit: Register if taxable turnover > £90,000; The limit is exceeded only if turnover is above £90,000. Exactly £90,000 does not trigger registration.
Historic test: Taxable turnover for the last 12 months (or since start, if shorter) > £90,000 at the end of any month; Apply at each month-end. Notify HMRC within 30 days of the end of the month in which the limit was exceeded.
Historic test: effective date of registration: Registered from the first day of the month 2 months after the month in which the limit was exceeded; Unless HMRC agrees an earlier date. Example: limit exceeded in March, registered from 1 May. The notification deadline is 30 days after the end of March.
Forward look test: Expected taxable turnover in the next 30 days > £90,000; Notify HMRC by the end of the 30 days. Registration is effective from the date you realise this, being the start of the 30-day period.
Deregistration limit: Can deregister if taxable turnover in the next 12 months is expected to be £88,000 or less; Included only to contrast with the registration limit.
Compulsory registration limit: Taxable supplies > £90,000 → must register; Figure given in the ACCA tax rates and allowances. Below it, registration is voluntary.
Deregistration limit: £88,000; A registered trader may apply to deregister if expected taxable supplies fall to this level or below. Check the rule's exact wording in your notes.
Net VAT effect of registering: Output tax – input tax recovered = net VAT payable (or repayable); If the result is a repayment, registration helps cash flow.
VAT on a VAT-inclusive price: VAT = VAT-inclusive price × 20/120; Use when the trader absorbs VAT in the existing price. Standard rate is 20%.
Exemption for zero-rated suppliers: HMRC may exempt a trader whose taxable supplies are wholly or mainly zero-rated; Applies if the trader would otherwise get repayments. The trader loses input tax recovery.
Deregistration limit: Expected taxable turnover in next 12 months ≤ £88,000; Given in the tax rates and allowances. The trader may then apply to deregister.
Registration limit (for comparison): £90,000; Do not mix it up with the £88,000 deregistration limit.
Compulsory deregistration: Ceases to make taxable supplies → must deregister; Notify HMRC within 30 days of ceasing.
VAT on assets in hand: VAT = current market value of assets held × 20% (VAT-exclusive value × 20%); Only for assets on which input tax was claimed. Ignore the charge if the VAT is £1,000 or less.
Standard rate: 20%; Use it on the VAT-exclusive value of the assets. If the value is VAT-inclusive, multiply by 20/120.
Registration limit and deregistration limit: Register if taxable turnover > £90,000; deregistration limit £88,000; Both figures are given in the ACCA tax tables. Use them, do not rely on memory.
Historic test: notification and effective date: Notify within 30 days of end of month limit exceeded; effective date = 1st day of 2nd month after that month; Exceeded in July: notify by 30 August, effective 1 September.
Future test: notification and effective date: Expected taxable supplies in next 30 days alone > £90,000; notify by end of that 30-day period; effective from start of the period; Based on expectation, not past turnover.
Pre-registration input tax: Goods: bought within 4 years before registration and still held. Services: supplied within 6 months before registration; Must relate to the business; the VAT must be incurred on supplies to the business.
Late notification penalty: Penalty = % × VAT due from date should have registered to date of notification; minimum £50; Up to 9 months late 5%; over 9 up to 18 months 10%; over 18 months 15%.
VAT group: One registration; supplies between members ignored; joint and several liability; Companies under common control; one return by the representative member.
Non-UK business: Taxable supplies in UK by a business established abroad: registration threshold £0; Must register from the first taxable supply.

Quick revision

The standard VAT rate is 20%.
The registration limit is £90,000 and the deregistration limit is £88,000.
Only taxable supplies count towards the registration limit; exempt supplies do not.
A taxable person is someone making taxable supplies who is, or should be, registered.
A trader below the limit may register voluntarily.
Registration is based on taxable turnover, so check the facts given in the question carefully.
Late VAT payments: none up to 15 days late, 3% for 16 to 30 days, and 6% plus a daily penalty at an annual rate of 10% for more than 30 days.
Error penalty maximums are 100% for deliberate and concealed, 70% for deliberate but not concealed and 30% for careless.
A trader may deregister if expected taxable supplies in the next 12 months will not exceed £88,000.
Read each question for the date and the type of supply before you apply any rule.

Common mistakes

Treating zero-rated supplies as exempt. Fix: Remember zero-rated is taxable at 0%, counts towards the registration limit and allows input VAT recovery. Exempt does none of these.
Including exempt supplies when testing the £90,000 limit. Fix: Count only standard, reduced and zero-rated supplies.
Including exempt supplies in taxable turnover. Fix: Read the supply types first and exclude exempt and outside-scope income. Zero-rated supplies are included.
Testing against the tax year or accounting year instead of a rolling 12 months. Fix: Test at the end of every month using the last 12 months, or the period since the start if shorter.
Saying a trader below £90,000 cannot register. Fix: State that below the limit registration is a choice, and the trader can register at any time.
Forgetting that an exempt trader cannot recover input tax. Fix: Always point out the lost input tax recovery when advising exemption.
Using £90,000 as the deregistration limit. Fix: Write down both: register at £90,000, deregister at £88,000.
Testing past turnover instead of the next 12 months. Fix: For voluntary deregistration, use expected taxable turnover for the next 12 months.
Using the end of the month as the effective date under the historic test. Fix: Effective date is the 1st day of the second month after the month the limit was exceeded. The deadline is 30 days after the end of that month.
Starting the future test 30-day period at the end of the period. Fix: Registration is effective from the start of the 30-day period. You notify by its end.

Exam tips

Always check whether figures are VAT-exclusive before comparing them with £90,000.
Write the contrast clearly: zero-rated allows input VAT recovery, exempt does not.
In OT cases, read all five questions first. The same supply list is often used for classification, totals and recovery.
In written answers, name the category of each supply and give a one-line reason.
Highlight the supply types in the scenario. Exempt supplies do not count towards the £90,000.
Show a cumulative turnover column. It earns method marks even if you slip on the final date.
Write out both dates clearly: the notification deadline and the registration date. Examiners test them separately.
Always mention the forward look test in a written answer, even to say it is not met.