HMRC have recently announced that they are commencing a purge on businesses that are not VAT registered, but which should be. I suspect that they are looking at businesses that have submitted accounts to HMRC i.e. the “Taxman”, showing them with turnover in excess of the threshold. The expression “shooting at fish in a bucket” springs to mind, of course, but they have to start somewhere. They are, of course, publicising this initiative and hoping that other businesses will crawl out of the woodwork as well. The carrot that they are offering is the ability to come clean, without too much punitive damage. However, if you have been trading for a while and not charging VAT, HMRC will want the notional VAT from you – and whether or not your customers will be happy to pay up after the event is debatable. If you do the decent thing, though, HMRC are suggesting that they will only charge you a 10% penalty on top – well, on top of the VAT that you should have charged. Bless.
But if you ignore them you could be looking at something approaching a 30% penalty, or worse..
One final point – if you are unregistered, you should be monitoring your income on a ‘rolling’ 12 month basis, not simply looking at it at the end of your financial year.