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Hi.If you inform HMRC that you should have registered for VAT three years ago, you will almost certainly have to pay a financial penalty based on the amount of VAT due for the period that you were not registered when you should have been. You can read about the penalty regime here. In addition, you will have to pay the VAT that you would have paid had you registered when you should have. Read about that here. You can try to ask your customers to pay the VAT you should have charged them and those who can reclaim it may help you out but I wouldn't rely on it. I know of many cases where traders have registered when they realised that they should have done so earlier and have taken the chance of not having earlier years figures audited in a VAT inspection. However, you will be given more leniency when it comes to assessing a penalty if you come clean rather than have HMRC tell you that you should have registered some time earlier. Unfortunately, ignorance is no excuse, though you will read of mitigating circumstances in the notes I gave you links to.I hope this helps but let me know if you have any further questions.