VAT can be a confusing area for many small business owners, especially those who are just starting out or handling their own finances. A recent case involving a gardener who received a £19,000 VAT bill due to a simple misunderstanding highlights how easily things can go wrong. In this article, Wimbledon accountants explain what happened, why it matters, and what steps you can take to avoid falling into the same trap.
VAT Case Study: A Warning for Small Businesses in Wimbledon
- The gardener used to be VAT-registered, meaning he had to charge VAT (currently 20%) on his invoices.
- At some point, he deregistered from VAT — likely because his turnover fell below the VAT threshold or he no longer needed to be registered.
- However, he continued to work on jobs that were agreed and quoted while he was still VAT-registered.
- He did not charge VAT on those jobs after deregistering, believing he was no longer required to.
- HMRC disagreed — they argued that because the jobs were agreed while he was still VAT-registered, VAT should still have been charged, even if the work was done later.
- As a result, HMRC sent him a surprise VAT bill for £19,000, covering VAT he should have collected and paid, but did not.
Advice from Wimbledon Accountants on VAT Deregistration
HMRC requires businesses to register for VAT once their taxable turnover exceeds the current threshold of £90,000 (2024/25). But deregistration is not always a clean break. You must consider:
- Outstanding invoices
- Work completed but not yet invoiced
- Advance payments
- Supplies made before deregistration but received after
A lack of awareness around these rules is what caught the gardener off-guard.
VAT Lessons from Accountants in Wimbledon for Small Business Owners
If you are a sole trader, landlord, or run a limited company, this case should serve as a warning. Here are a few key takeaways:
1. Know Your VAT Obligations
Always keep track of your turnover and VAT registration status. If you deregister, ensure you are fully aware of any liabilities that may still apply.
2. Get Professional VAT Advice
Working with experienced Wimbledon accountants, such as Southside Accountants, helps you avoid errors that can result in significant financial penalties.
3. Understand How Contracts Impact VAT
Even after deregistering, contracts signed while registered can still trigger VAT obligations. Seek guidance on how HMRC may interpret your business arrangements.
4. Keep Detailed Records
Maintain records of when jobs are completed, when invoices are issued, and when payments are received. This helps to clarify your position in the event of a dispute.
What HMRC Checks – Advice from Wimbledon VAT Experts
HMRC considers multiple factors when determining VAT liability, including:
- When the service was performed
- The date of invoicing
- Payment terms
- The status of the business at the time of the transaction
Misinterpretations or a lack of documentation can lead to costly decisions going against you.
Support from Wimbledon Accountants for Small Businesses
At Southside Accountants, we help businesses across Wimbledon SW19, Tooting SW17, Clapham SW4, and South London understand their tax obligations and avoid expensive mistakes. Whether you need help with VAT registration, deregistration, or a VAT dispute, we can provide clear, professional advice tailored to your situation.
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