Exception from Vat Registration
HMRC have discretion to except a business from registration where they have gone over the VAT limit under the backward (but not forward) look and crucially, can demonstrate at the time of exceeding, that there are reasons why the turnover will drop below the deregistration limit (currently 83K) in the next 12 months. Further information can be found regarding exception from registration and the application process at https://www.gov.uk/hmrc-internal-manuals/vat-registration-manual/vatreg19000.
This should not be confused with the forward look for deregistration, where a business still trading can apply for deregistration if it can satisfy HMRC that the taxable turnover in the next 12 months will not exceed the deregistration limit.
The legislation underpinning this is contained in paragraph 4(1) Schedule 1 VAT Act 1994:
4(1) Subject to sub-paragraph (2) below, a person who has become liable to be registered under this Schedule shall cease to be so liable at any time after being registered if the Commissioners are satisfied that the value of his taxable supplies in the period of one year then beginning will not exceed £83,000.
However paragraph 4(2) goes on to say:
4(2) A person shall not cease to be liable to be registered under this Schedule by virtue of sub-paragraph (1) above if the Commissioners are satisfied that the reason the value of his taxable supplies will not exceed £83,000 is that in the period in question he will cease making taxable supplies, or will suspend making them for a period of 30 days or more.
Although, on the face of it, paragraph 4(2) appears to apply specifically to deregistration cases, HMRC’s policy is to apply it equally to decisions in respect of exception from registration. This policy has been tested and upheld in the First Tier Tribunal (Lane  TC 04815) and in the High Court (Gray v C & E Commrs  BVC 396).