In all your years in business you’ve never needed to register for VAT. However, a one-off and potentially lucrative contract will temporarily push your turnover above the registration limit. Can you dodge registration?


As you may know, you are required to register for VAT if your business makes taxable supplies, and meets one of two tests:

  • its cumulative turnover in the last twelve months exceeds £85,000 (for 2020/21); or
  • its turnover in the next 30 days will exceed £85,000.

One-off projects

Let’s suppose your business has been trundling along with a steady income of £6,000 per month, and will continue to do so indefinitely. You’re offered the chance to do some one-off project work for a local authority, for which you will be paid £20,000. The work is outside what you normally do on a day-to-day basis, but it is within your field of expertise. Payment for the supply will be made when the job is complete. This means for VAT purposes it will all fall in one quarter causing you to breach the VAT threshold. You don’t want to register if you can help it, so what can you do?

Business or non-business?

The first question to ask is whether or not you need to include the extra £20,000 at all when considering the threshold. Whilst in most cases the answer will be “yes”, VAT is only payable on the taxable supply of goods or services if the supply is made “in the course or furtherance of any business carried on” . If it’s possible to argue that the extra activity is exempt from VAT (for example it relates to education), or it doesn’t relate to your continuing business, you might be able to ignore it. Naturally, HMRC will want you to justify your view.

Business tests

The fact the income is one-off and won’t be repeated isn’t enough to make it non-business income – though it might be a factor. Whilst each case will turn on its own merits, six key tests have been established that will help you decide whether the income is business or non-business related. It will help you to read HMRC’s view of these.

From these tests, there are encouraging signs that your additional £20,000 could be non-business income. However, there are also points where the tests suggests it relates to your business. For example, the £20,000 would represent a large chunk of your total annual turnover.

Tip. The safest bet would be to seek advice, either from an experienced VAT advisor, or ask HMRC for its view – though the latter is likely to be biased. If HMRC agrees that the income is non-business, ask it to put it in writing otherwise you might not be able to rely on it.

Last resort

If, after looking at the tests, you conclude that it is business income and that you will need to register, there’s still a chance of avoiding registration. You need to convince HMRC that your future turnover will fall below the VAT deregistration threshold (£83,000 for 2020/21). The decision is entirely up to HMRC, so ensure you provide as much information as possible to support your case.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit or call 01233 653500.