Could anyone advise me on the following situation:
HMRC audits the accounts of a sole trader and discover that, 5 years ago, he exceeded the VAT threshold for one month only, before dropping back below the deregistration threshold ever since. The trader's business deals in buying and selling second hand electronics from and to private (non-VAT registered) individuals.
Is the trader likely to be retrospectively VAT registered for the entire 5 year period, and have to pay VAT on all turnover since then (potentially tens of thousands of pounds of VAT), or is there some way to reduce this liability? I have heard the phrase 'LNLL' (liable/no longer liable) mentioned, but do not know what the force of it is, and whether it would apply in this situation.
Any advice would be gratefully appreciated.
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