HMRC Letters - VAT Registration

HMRC has been issuing what are sometimes called "one to many" letters to businesses it believes may have exceeded the VAT registration threshold - currently £90,000 on a rolling 12-month basis. If your business has received one of these letters, it should not be ignored.
 
HMRC uses third-party data, including information from Companies House, banking institutions, and online platforms, to identify businesses whose turnover appears to breach the threshold. A letter of this kind indicates that HMRC has already formed a view and is inviting a response. The obligation to register arises automatically once the threshold is exceeded, and ignorance of that fact does not provide a defence.
 
The consequences of late registration can be significant. Where a business should have registered but did not, HMRC can assess for VAT going back to the date registration was required, charge a late registration penalty, and add interest on unpaid amounts. The difficulty is compounded where the business has not been charging VAT to its customers - the liability crystallises regardless, meaning the VAT must be funded from income that was never collected with VAT in mind.
 
Not every business that receives such a letter will have a registration obligation. Some income streams may be exempt or outside the scope of VAT altogether, and these are excluded from the threshold calculation. The letter is a prompt to review the position carefully, not necessarily a finding that registration is overdue.