Case Study: How We Reduced a Client's HMRC VAT Bill by 78%

Background

In 2023, a client purchased a local takeaway business as a sole trader. With weekly takings around GBP 6,000 the business quickly approached the UK VAT registration threshold of GBP 90,000 annual turnover.

Under UK VAT rules, once a business passes the threshold it must register for VAT and charge customers VAT on applicable sales. The client crossed the threshold on 20 July 2024 but did not inform HMRC.

The HMRC VAT compliance check

Marketplaces such as Just Eat are required to report business turnover to HMRC (Finance Act 2023, section 349). HMRC compared that data with the client's January 2025 Self Assessment submission and opened a VAT compliance check in April 2025.

Because the client had not charged VAT, HMRC calculated GBP 37,000 of VAT due for the 2023/24 tax year. The demand arrived without warning and understandably caused a lot of stress.

How we helped

We contacted HMRC immediately, gathered records, and rebuilt the VAT calculation with accurate rates and inputs.

• Identified allowable VAT inputs, including rent, accountancy fees, some stock, utilities, and phone costs, totalling GBP 1,150.
• Reviewed VAT rates on sales. A quarter of turnover related to cakes and milkshakes that attract a zero rate.
• Re-ran the VAT computation so both standard rated and zero rated sales were treated correctly.

• Of the GBP 222,000 above the registration threshold, only GBP 55,500 was actually standard rated at 20 percent.
• After this correction the gross VAT due dropped to GBP 9,250.
• Deducting eligible input VAT of GBP 1,150 brought the amount payable down to GBP 8,100.

Results

Initial VAT bill from HMRC

GBP 37,000

Final agreed VAT liability

GBP 8,100

Total reduction achieved

GBP 28,900 (78.1 percent decrease)

Key takeaways

• HMRC can use third party data, including food delivery platforms, to monitor turnover.
• Businesses must register for VAT once rolling 12 month turnover exceeds GBP 90,000.
• Advisers who understand zero rated and reduced rate items can materially lower VAT exposure.

How we can help you

We specialise in:

• HMRC VAT compliance checks and negotiations
• VAT registration support
• Tax planning and accounting for sole traders and limited companies

If you are approaching the VAT threshold, speak to us before HMRC does. We will review your numbers, manage the paperwork, and protect your margins.