VAT registration: are you counting everything that matters?

The VAT registration threshold can be easy to lose sight of, particularly for organisations whose main activities are exempt from VAT or outside its scope. Once an organisation carries on any taxable business activity, however, monitoring only the income recorded as sales in its accounts may not be enough. Certain services bought from overseas suppliers can also count towards the threshold under the reverse charge, potentially creating a registration requirement even where the organisation’s own taxable sales remain below £90,000.

This issue can be particularly relevant in the charities and non-profit sector, where taxable, exempt and non-business activities often sit alongside one another. But it is not confined to that sector. A recent First-tier Tribunal decision illustrates more broadly that registration obligations follow the statutory rules and the underlying business activity, not the taxpayer’s understanding of where the obligation sits.

A change of owner did not reset the clock

In Chandra Bahadur KC v Revenue and Customs Commissioners [2026] UKFTT 01300 (TC), an individual took over a takeaway business previously carried on by a company and continued it as a sole trader after the company was dissolved. The company’s taxable supplies in the year before the transfer had exceeded the VAT registration threshold, although it had not registered for VAT.

The Tribunal found that the business had continued without material interruption and had been transferred as a going concern. The statutory rules therefore treated the individual as having carried on the business before the transfer, with the result that the company’s earlier taxable supplies had to be taken into account in determining whether he was liable to register.

The result did not depend on whether the individual knew the level of the company’s earlier turnover or appreciated that it could affect his own VAT position. The company was a taxable person because it was required to be registered, even though it had not in fact registered. The individual was therefore liable to be registered from the date of the transfer, subject to the statutory exception where expected turnover after the transfer is below the relevant limit.

The threshold test is wider than sales income

A person is generally required to register when the value of taxable supplies exceeds £90,000 over a rolling 12-month period. A separate forward-looking test applies where taxable supplies are expected to exceed £90,000 in the next 30 days alone. These are ongoing tests, not calculations performed only at the financial or tax year end.

An easily missed part of the calculation is the reverse charge for certain services received from suppliers belonging outside the UK. Under section 8 of the Value Added Tax Act 1994, the UK recipient is treated as making the relevant taxable supply itself. Where the recipient is not registered, the value of reverse charge services must be added to its taxable turnover when considering whether registration is required.

This can catch an organisation whose own taxable sales are relatively modest. Overseas consultancy, technology, advertising and other professional services may increase the turnover relevant to the registration test even though the organisation is the customer, rather than the supplier, in the underlying transaction. The precise treatment depends on the nature of the service and the place-of-supply rules.

Why charities and non-profits should take particular care

Charities and non-profits may receive donations or grant funding that is outside the scope of VAT, or make supplies that are exempt. Those amounts do not become taxable turnover merely because the organisation has other taxable activities. However, an organisation that is a relevant business person for the place-of-supply rules should not assume that its registration position can be assessed by looking only at its outward taxable supplies. Relevant reverse charge services may also need to be included.

The practical risk is particularly apparent where an organisation has a mixed profile: non-business or exempt activity alongside a smaller taxable stream, combined with material purchases of services from overseas. The same issue can arise for any business with international suppliers, and HMRC’s published guidance gives the example of a wholly exempt UK insurance broker that may nevertheless be required to register because of reverse charge services.

Registration and deregistration both require monitoring

Where the rolling 12-month threshold is exceeded, HMRC must generally be notified within 30 days after the end of the relevant month. Registration will normally take effect from the beginning of the second month after the threshold was exceeded.

Monitoring should not stop once registration has been addressed. A registered person must notify HMRC within 30 days if they cease to make, or no longer intend to make, taxable supplies. This is different from a business simply falling below the £88,000 deregistration threshold. If taxable supplies continue, cancellation is generally voluntary and HMRC must be satisfied that expected taxable turnover in the next 12 months will not exceed that threshold.

A practical monitoring approach

Organisations should build VAT registration and deregistration into their regular tax review rather than leaving the question until annual accounts are prepared. In particular, they should monitor:

• taxable supplies on a rolling 12-month basis, keeping taxable, exempt and non-business income clearly distinguished;

• large or unusual transactions that may engage the 30-day forward-looking registration test;

• services purchased from overseas suppliers that may fall within the reverse charge;

• whether changes to activities, ownership or business structure affect the registration analysis; and

• whether taxable supplies have ceased, so that a compulsory deregistration notification may be required.

The central point is that VAT registration is not determined solely by headline sales, and deregistration is not automatic when circumstances change. Periodic review of both sides of the registration lifecycle can prevent liabilities (together with possible interest and/or penalty charges) from accumulating unnoticed.