Overdue VAT with zero sales

I have what I certainly hope is a unique situation as no one anywhere should endure this. I would appreciate any pointers as to what a logical next step would be. I am an overseas seller into the UK. In anticipation of the commencement of trading, we registered for VAT in June. After no response or notification, we chased in August via the online form. In October we got a response saying we had been approved etc. A week ago, we received a letter (2 weeks after the letter date) saying we are overdue on VAT, we owe circa £2000 plus late return and late payment fees. Where this farcical number was derived is beyond me. In essence they claim they approved us on 13 July. We should have made a return in August and we now owe 2000. Laughable if it wasn’t so annoying. In trying to contact an online agent, they told us, the information we provided in the online chat was wrong (address and business name) - not possible and this was the information on the letter. They said they couldn’t help and to email the debt help desk. I have now tried to cancel the VAT registration as no sales have or will be made for the period (delaying UK rollout). This was declined. They have asked for a letter to mailed to them to challenge the cancellation. I have now also set up a tax reporting software to only file a nil return. Currently at my wits end with all of this. Here I thought proactive was the way to go, but clearly that was a mistake. There seems absolutely no way to contact the HMRC to clear up this magical 2000 number. Their website has you going around in circles. The tone of the letter was so disrespectful, I was extremely surprised to see a government agency deals with businesses in such a manner. That been said, if anyone knows how I can contact the HMRC from Asia to clear this theatrical production up, please do share. I appreciate any guidance from those more adept in this space.

You need to file a VAT return, if you are saying you've made no sales, then file a Nil VAT return. You file that through bridging software or digital accounting software. You will not be allowed to deregister whilst you have an outstanding VAT return. The £2,000 is not a laughable made up figure, it is based on what you put on your VAT registration when the question asked you what level of turnover you expect to have in the next 12 months. If you said £50k of sales, output tax would be £10k and HMRC use a formula to estimate input tax that you might reclaim each quarter and arrived at the £2k figure, it is an estimate based on your own turnover estimate and the sector you are in (retail, IT, consultancy, etc). Once the return is filed, the estimated £2k will be adjusted to reflect the correct liability, in your case you are stating the liability is Nil, the £2k disappears, you are up to date with your filed VAT returns, no liability and no penalties or interest, then you can deregister, you can deregister via the government gateway/portal that you have for VAT. HMRC can have delays in processing VAT registrations, especially overseas traders in Asia and as HMRC use the postal system to communicate, there can be further delays as post can take 10-14 days to arrive at the overseas destination. Registering for VAT (or indeed any tax in a foreign jurisdiction) always comes with a risk of not knowing the procedures, not knowing the domestic legislation or rules and the risk of having to deal with problems like delays that have caused this issue which then need to be fixed. When you received your VAT registration letter in the post, you should have promptly setup your government gateway and added the VAT service and you would have seen when your first VAT return was due and potentially avoided the late filing issue. There was clearly some delay in you receiving the letter from HMRC and this could have meant your first VAT return was due very quickly after the VAT number was issued, but equally, HMRC are not responsible for postal delays or if the post was lost/undelivered. Stuff like this does happen, letters get lost or delayed in the post, HMRC will still issue estimated penalties as HMRC will not know you didn't receive the letter on time, etc. It is just part of dealing with a foreign tax office (HMRC) as a foreign trader. I have clients that have similar frustrations dealing with the French or German tax offices, it is just the way it is. There is no specific guidance that gives you a simple answer, instead you have to read various different parts of VAT guidance that deals with registration, penalties and deregistration, etc.

Hi Ilume,
I am sorry to hear you are having such issues..
If you have not yet received your VAT Registration number then please contact our Helpline on +44 2920 501 261 so that we can send out your VAT Certificate.
With your VAT number you can then connect your software to submit the returns you need,
Any assessments you have received will be withdrawn once the returns are received by us.
Thank you. 

@Jason Croke. Thank you for the detailed response. A few things you said are indeed spot on. By the time we were chasing the 40 day period, no letter had been received. So by the time we were being tagged as overdue, we had no letter. We waited another 2 months before hearing back via email. It seems odd to me that the preferred communication however susceptible it is to inconsistency is chosen by HMRC. Here, all notifications are done via both an online platform and mail. On the topic of 50k, we would not have expected that for the FY given our application was at the middle of the year with zero market entry at that point. We specifically chose not to kick off sales prior to confirming registration for the very reason you articulate. Not wanting fall foul of any misinterpretations. Reading the guidelines is one thing. When that then doesn’t work and you are trying to get help, I have to say it has not been easy at all. This response is the only useful (and timely) help we have received through the entire process. All of that been said, a Nil return has been filed with compatible third party software. There is currently no acknowledgment of that. The decision is now between continuing to file quarterly nils or deregistering completely. I certainly hope the EU entry is a lot smoother. Thanks again.