Businesses that have reached the annual turnover threshold for VAT registration, which is £73,000 for the 2011/12 financial year, but have failed to register with HM Revenue & Customs (HMRC) must act quickly if they want the opportunity to limit hefty fines.

Such businesses have until 31 December, 2011 to register for VAT under HMRC’s VAT Initiative campaign.

The VAT Initiative, which HMRC launched earlier this year, offers VAT rule-breakers lower fines and a special plan to rectify their failure to comply with VAT rules.

HMRC identifying businesses failing to comply with VAT rules

HMRC is currently identifying businesses that have so far failed to come forward. The firms it contacts will be subject to substantially higher penalties and may even face criminal prosecution for their failure to register for VAT.

Among the trades the HMRC VAT Initiative is concentrating on are; construction, business services, hair and beauty, hotels and catering, retail distribution, recreational services, motor vehicle distribution and repair, sanitary and domestic services, agriculture and horticulture, property and road haulage.

Under the VAT Initiative scheme, businesses that have registered to participate must register for VAT by 31 December 2011. After registration, businesses will receive their VAT registration number and instructions on how to complete their first VAT return.

Lower penalties for businesses stepping forward

After businesses have submitted their first VAT return, most will face a lower penalty rate of 10% on the VAT that has been paid late.

On reminding businesses of the impending deadline, Marian Wilson, HMRC’s Head of Campaigns, said, “Those who have told us of their intention to disclose now have until the end of December to register for VAT. They must then submit their first VAT return and make arrangements to pay.

“We are determined to ensure everyone pays their fair share and, since September, have begun identifying people and companies who we believe are trading above the VAT threshold but have not come forward. We will be targeting these groups early in the New Year.

“I urge anyone with unpaid tax to use it to come forward and avoid potentially lengthy and costly investigations. The penalty they will pay will still be lower than when HMRC catches up with them.”

HMRC dedicated VAT team

Businesses who have failed to register for VAT despite crossing the annual turnover threshold, but now wish to do so, should contact HMRC on 0845 600 5217, where a dedicated team is on hand to provide information and advice. Lines are open Monday to Friday, 8.00am to 4.00pm.

Those coming forward are also invited to disclose any other tax arrears they might have. Where a penalty, on undeclared tax other than VAT, is due it will also qualify for a lower than usual penalty, which can be up to 100% of the tax owed.

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