17% of Businesses Failed to Register for VAT Last Year

VAT Registration Chaos: 17% of Businesses Left in the Dark

When HMRC rolled out its new VAT registration guidelines, 17% of over 300,000 applicants—about 53,000 businesses—faced a failed application. Pretty rough for anyone trying to start a new venture, look‑here.

What That Means for Small Businesses

Not getting VAT‑registered is like trying to run a store with a card that says “No Entry.” The end result? Fewer businesses operating, less economic buzz, and a slimmer tax bill for the Treasury.

Fraud Fever & The Over‑Cautious HMRC

HMRC has tightened its grip on fraud, cracking down on dodgy vocalists and ensuring they correct any misstep. Some traders are even seeing hefty penalties.

But a sleeker fraud filter clashes with a full‑blown customer service siege.

In March 2024, 71% of callers waited over 10 minutes to reach a VAT officer, up from just 48% in 2022.
On average, a caller now spends more than 25 minutes on hold.
When finally speaking to an officer, they’re often sent to the “Official Guidance” manual to decode their query themselves.

Jas Dhillon’s Take– “This Isn’t Good for the Treasury or Us”

“HMRC’s approach to small business shows no sign of improving. It stops new businesses from trading and stunts growth,” says Jas Dhillon, Partner at Lubbock Fine. He believes the UK should make it easier than ever to kick off a venture.

Why Applications Fail

HMRC deems the submission full of errors (from directors’ personal details to the company’s address or financials).
They misinterpret the business activity description, leading to a whole lot of confusion.

Dhillon warns: “Even a tiny inconsistency can mean a wholesale refusal. It’s a real nail‑biter for any small business.”

When Businesses Drop Their Applications

“ HMRC might knock back the submission, refusing to move forward until they get a missing piece of info.”
Or the business owner might misread the VAT registration rules and prematurely abandon the process.

“A lot of entrepreneurs are fed up with the red‑tape,” Dhillon adds. “Just when you think you’re onto it, HMRC wants more details, and suddenly it feels like starting from scratch. It’s no wonder some just give up.”