Do I have to register for VAT if my turnover has reached the level where a business is required to register, but I expect that the value of my taxable supplies will reduce? I am a consultant; my customers are based in the UK and I have just won a contract to provide consultancy services to an Australian company, this income will definitely push my turnover over the registration threshold; but it is a one-off?
If at the end of any month the value of your taxable supplies for the last 12 months has gone over the registration threshold, currently £77,000 but you can provide evidence and explain why the value of your taxable supplies will not go over the deregistration threshold, currently £75,000 in the 12 months following the point that the registration threshold was exceeded, then you can request an exception from VAT registration with HMRC.
You must still tell HMRC that you have reached the limit within 30 days of the end of the month that the threshold was exceeded and ask for exception from registration.
If you are granted exception from registration you do not become immune from a liability to register with regards to the supplies you continue to make. You should continue to monitor the value of your taxable supplies on a monthly basis to determine if a further liability arises. You should still monitor your previous turnover even where you were previously granted exception, as this does not form a cut-off date for monitoring your turnover. If a further liability arises you will have to apply again for exception
When calculating whether your turnover has exceeded the limit; ‘outside the scope’ income doesn’t count towards the registration threshold. Therefore; it is necessary to look at the place of supply of your services. There is no ‘special’ place of supply rule for consultancy services. As such, the VAT liability of these services is decided under the general rule. For general rule services the place of supply is determined by the status and place of belonging of your customer (irrespective of where the work is carried out). The status of the customer will be either business to business, B2B or business to consumer, B2C.
As your customer is in business and belongs in Australia; your services will be outside the scope of UK & EU VAT. This income will not count towards the VAT registration threshold; so if the total of your taxable supplies is under the VAT registration threshold you will not need to request an exception from VAT registration.
It is worth noting that even if your Australian customer is B2C, (i.e., a private individual, a charity, government department or other body with no business activities, or a ‘person’ who receives the supply of services for private purposes) in the case of a supply of consultancy services; the VAT liability would be the same. Schedule 4A of The VAT Act 1994; provides a list of ‘intangible’ services which remain outside the scope of UK and EU VAT when provided to either a business or private individual if they belong in a country outside of the EU.