HMRC has recently increased its use of the One to Many approach, where HMRC sends the same message to many taxpayers and businesses to ‘nudge’ them towards meeting their compliance obligations. This type of communication is designed to influence behaviour, but importantly, it is not a compliance check.
One of the latest campaigns involves issuing letters to businesses whose reported turnover on corporation tax or self-assessment returns exceeds the VAT registration threshold of £90,000.
However, these letters can be confusing. They may indicate that the business is required to register for VAT purely because total turnover exceeds £90,000 – but VAT registration is not based on total turnover. It is based solely on taxable turnover.
Why Turnover Over £90,000 Doesn’t Always Mean You Must Register
The VAT registration threshold has been set at £90,000 of taxable turnover on a rolling 12‑month basis since 1 April 2024, and it continues unchanged through 2025–26.
Therefore, even if declared turnover exceeds £90,000, a business may still not need to register if part of that income is:
- Exempt from VAT (e.g., certain financial or educational services), or
- Outside the scope of UK VAT (e.g., some non‑UK supplies).
These categories do not count towards taxable turnover.
How to Calculate VAT Taxable Turnover
To determine whether VAT registration is required, you must calculate your VAT‑taxable turnover, which includes:
✅ Standard‑rated supplies (20%)
✅ Reduced‑rate supplies (5%)
✅ Zero‑rated supplies (0%)
But excludes:
❌ VAT‑exempt supplies
❌ Outside‑scope income
The Rolling 12‑Month Test
VAT registration is not based on your financial year. HMRC uses a rolling monthly test:
- At the end of each month, total the previous 12 months of taxable turnover.
- If this exceeds £90,000, you must notify HMRC within 30 days.
This rolling method catches many businesses out because turnover can creep up gradually.
The 30‑Day Forward Look
You must also register if you expect your taxable turnover to exceed £90,000 in the next 30 days alone.
Why HMRC Is Sending These Letters Now
HMRC uses digital data, return submissions and cross‑matching to flag cases where turnover appears close to or above the threshold. The purpose of the One to Many letters is to prompt businesses to:
- Reassess their VAT registration position
- Take action early if VAT should have been charged
- Correct any errors voluntarily
This allows HMRC to encourage compliance without immediately opening a formal investigation.
If, after reviewing your income, your taxable turnover is below £90,000, you do not need to register for VAT, although you may be able to voluntarily register.
How the Xeinadin VAT Team Can Help
Navigating VAT thresholds can be complex, especially for businesses with exempt or international supplies. Our VAT specialists can:
✅ Review your turnover and calculate your true taxable turnover
✅ Confirm whether VAT registration is required or advisable
✅ Support you with compulsory or voluntary VAT registration
✅ Help you respond to HMRC’s One to Many letter (if required)
✅ Provide ongoing VAT compliance and advisory support
If you’ve received one of these letters or need clarity, our team is here to guide you through every step.
