VAT realms!

ademoore

I have a client just finished first year accounts.

He had some business income a few weeks prior to Ltd company being set up, around £6.5k worth. Was intending to add this, along with pre-trading expenses, into the first year accounts.

His first 12 months trading came in at £65k, which is fine for VAT thresholds, however, when I add the £6.5k prior income, as intending, this then takes them over the limit for VAT and since a one-off situation, I have told the client we should apply for an exception for registration from VAT. The second year will not come above £65k.

There's a couple of options -
1. Apply for the exception and hope it is granted or,
2. Add the £6.5k and if called for vat registration, then be honest and say the £6.5k was outside the 12months zone, and added in to cover all income (about 13 months)

What would you guys do?

ademoore

By the way, this is for last year, so VAT threshold was about 70k, and the 6.5k addition put him at 71.5k

Monsoon

Strictly speaking if the company didn't exist when the £6.5k was carried out, then it's not its turnover, and needs to be declared as self employment income. I don't think VAT is the issue here.