Yes, if HMRC agrees. When your rolling 12 month turnover goes over £90,000 but you can show that taxable supplies in the next 12 months will not be more than £88,000, you can apply for exception from registration. It has to be applied for on paper, it is only available when you crossed the threshold on past turnover, and if HMRC refuses you are registered from the date you became liable.

What is exception from registration?

Exception is a relief written into the VAT Act 1994, Schedule 1, paragraph 1(3). A person does not become liable to be registered under the backward look if HMRC is satisfied that the value of their taxable supplies in the year beginning at the time they would otherwise have become liable will not exceed the deregistration limit. For 2026 to 2027 the registration threshold is £90,000 and the deregistration limit is £88,000.

So two conditions must both be met at the end of the month in question, as GOV.UK and Notice 700/1 paragraph 3.7 put it:

  • your taxable supplies went over the registration threshold in the last 12 months
  • you can show HMRC that your taxable supplies will not go over the deregistration threshold in the next 12 months

It is designed for a genuine one off: an unusual contract, a single exceptional month, or a short burst of trade that will not repeat. Exception is not automatic. Until HMRC writes to grant it, you should treat yourself as liable.

Is it the same as exemption from registration?

No, and HMRC stresses the difference. Exemption from registration under Notice 700/1 paragraph 3.11 is for businesses whose taxable supplies are all or mostly zero rated, so that registering would usually lead to repayments rather than payments. Exception is about the level of turnover, not the type of supply. A business with standard rated sales can apply for exception, but it could not normally obtain exemption.

When is exception not available?

HMRC’s manual at VATREG19050 says exception is only for people who became liable on their past turnover. If you expect more than £90,000 of taxable supplies in the next 30 days alone, you are caught by the forward look and cannot be excepted; see the 30 day forward look test. Exception also cannot help if your realistic forecast for the coming year is above £88,000, even if it is below £90,000. The test is against the lower deregistration limit, not the registration threshold.

It is worth checking first that the threshold really has been crossed. Asset sales are normally excluded from taxable turnover under paragraph 1(7), so selling a vehicle or piece of equipment does not by itself create a spike. The monthly calculation is explained in the rolling 12 month test.

How do I apply?

Exception cannot be claimed through the online registration service. GOV.UK lists it among the cases that must use a paper VAT1, and HMRC’s guidance sets out the steps:

  1. Telephone HMRC to request form VAT1, and say that the reason is an application for exception from registration.
  2. HMRC sends you form VAT1 and form VAT5EXC.
  3. Complete both forms and return them together. VATREG19250 confirms that the application must be made in writing using both forms.

HMRC says it will write to you within 40 working days. The letter will either grant exception or explain why it has been refused. Notice 700/1 asks you to send the application, with a full explanation, as early as possible. Because a refusal means registration from the date you were first liable, it is sensible to have the application in within the 30 days you would otherwise have to notify HMRC.

What evidence does HMRC need?

HMRC has to be satisfied that your taxable supplies over the next 12 months will not exceed £88,000. Its published guidance asks for a full explanation rather than listing set documents, so the application should make the case clearly. Evidence that usually helps includes:

  • monthly turnover figures for the last 12 months, showing where the spike came from
  • the contract, order or correspondence for the one off item, showing that it is complete and will not recur
  • a month by month forecast for the next 12 months and the basis for it
  • an explanation of anything that limits future turnover, such as capacity, the end of a contract or a change in the business

HMRC looks at what was known when the liability arose. In the tribunal case of Nash and Nash (MAN/96/1332), referred to at VATREG19150, it was held that only factors evident when registration should have taken place should be taken into account. A forecast built afterwards to fit the answer is unlikely to persuade, so keep dated records of why you expected turnover to fall back.

Worked example: a one off contract

Illustration only. A sole trader picture framer normally turns over about £60,000 a year. In spring 2026 she framed a large collection for a hotel refurbishment worth £35,000. At 31 May 2026 her rolling 12 month taxable turnover reaches £93,000.

  • She crossed the registration threshold at the end of May on past turnover.
  • The hotel work is finished and there is no repeat order. Her forecast for June 2026 to May 2027, based on her normal trade, is £62,000.
  • She phones HMRC in early June, receives forms VAT1 and VAT5EXC, and returns them with her monthly figures, the hotel contract and her forecast.

If HMRC is satisfied, it grants exception and she is not registered. If it is not satisfied, she is registered from 1 July 2026, the effective date that follows a liability arising at the end of May, and must account for VAT from then.

What do I need to do after exception is granted?

Exception is not permanent. VATREG19200 says it does not make you immune from a later liability and does not create a cut off date from which the rolling calculation restarts. HMRC’s specimen letter at VATREG47150 adds that, for the first year after the date exception is granted, you must still include turnover from before that date when you work out the value of your taxable supplies in the last 12 months.

That means the same spike can push your rolling total over £90,000 again at the next month end. HMRC applies a concession so you do not have to reapply each month purely because of the original spike, provided both of these apply:

  • turnover in the month just ending is less than one twelfth of the deregistration limit (about £7,333 at the current £88,000 limit)
  • you have no reason to believe you will exceed the deregistration limit in the following 12 months

If a genuinely new liability arises, you must tell HMRC and either register or apply for exception again. HMRC can also register a person from the date they would otherwise have been registered if it later finds exception was granted on a false statement.

What happens if HMRC refuses, or if I never applied?

If exception is refused, HMRC uses the details on your VAT1 to register you and you must account for VAT from the date you became liable, even on sales where you did not charge VAT. HMRC’s letters warn that a penalty, which could equal the VAT you should have paid, can follow if you did not notify on time.

A business that never applied can still ask for exception after the event. HMRC has discretion under paragraph 1(3) to allow retrospective exception, and VATREG19150 says it is reasonable to allow it where the information would have been available at the time and would have led HMRC to grant exception then. Where it is refused, the consequences are covered in what happens if you register for VAT late. If your turnover later settles below £88,000 after registering, you may be able to cancel; see VAT deregistration.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.