What is taxable turnover?
Taxable turnover is the total value of everything a business sells that is not exempt from VAT, and it is the figure used to determine whether the business must register for VAT. It includes standard-rated, reduced-rated and zero-rated sales, but excludes VAT-exempt sales and income that falls outside the scope of VAT altogether.
How is taxable turnover calculated?
Taxable turnover is measured on a rolling 12-month basis, not by financial year or calendar year. A business must add up the value of its taxable sales for the previous 12 months at the end of every month, and check whether that rolling total has gone over the VAT registration threshold of £90,000. It is also necessary to look forward: if a business expects its taxable turnover to exceed £90,000 in the next 30 days alone, it must register immediately.
Zero-rated sales and taxable turnover
A common misconception is that zero-rated sales do not count towards the VAT registration threshold. They do. Zero-rated supplies are still taxable supplies, taxed at 0%, so they must be included in taxable turnover, even though no VAT is actually charged to the customer. Only exempt and out-of-scope income is left out of the calculation
.Related terms: VAT, VAT Registration, VAT Registration Threshold, Zero-Rated VAT
VAT rules depend on the nature of transactions and individual circumstances. This glossary provides general information and is not personalised tax advice.