What is the penalty for late VAT registration in the UK?

Full answer

Businesses must register for VAT when their taxable turnover exceeds the VAT registration threshold (GBP 90,000 in 2026/27) in any rolling 12-month period. Failure to register on time triggers a "failure to notify" penalty under Schedule 41 Finance Act 2008. Penalty rates The penalty is calculated as a percentage of the Potential Lost Revenue (PLR) -- broadly, the VAT that should have been charged and paid from the date registration was required until the date HMRC discovered the failure or the taxpayer disclosed it: -- Up to 9 months late: 5% of PLR -- 9-18 months late: 10% of PLR -- Over 18 months late: 15% of PLR -- Minimum penalty: GBP 50 (even if PLR is very small) Deliberate behaviour increases the percentage: -- Deliberate but not concealed: 30-70% -- Deliberate and concealed: 45-100% Reduction for disclosure Penalties are reduced if the taxpayer discloses the failure to HMRC before they are investigated: -- Unprompted disclosure (before HMRC contacts you): significant reduction (up to 100% reduction for non-deliberate failures) -- Prompted disclosure (after HMRC contacts you): partial reduction The VAT itself is not a penalty -- it is always payable from the date registration was required. HMRC will raise assessments for all the VAT that should have been collected from that date, plus interest on late payment. Can VAT be recovered from customers? If the business charged prices including VAT (even if not registered), it may be able to issue retrospective VAT invoices to VAT-registered business customers to recover the VAT. Consumers (private individuals) generally cannot be charged additional amounts retrospectively -- the price agreed is treated as inclusive of VAT, so the business effectively bears the cost. Checking VAT registration requirement The 12-month rolling test means you should check turnover at the end of every month. If cumulative taxable supplies in any 12-month period end exceed GBP 90,000, notify HMRC within 30 days (registration takes effect from the end of that 30-day period, or the date you were aware of the requirement if earlier).