HMRC have announced that from 9 January 2013 they are embarking on a new campaign to chase up businesses that have one or more VAT returns outstanding. Their announcement reminds businesses that failure to submit a VAT return is an offence and penalties could be levied on top of any additional VAT that might be due to HMRC.
They have also stated that detailed information about how they plan to approach this campaign is not going to be released until the date the campaign is launched!
What to do?
The obvious answer is to get your outstanding VAT return(s) completed and submitted online as soon as possible and, preferably, before 9 January 2013 to avoid getting caught up in this campaign.
What if you cannot pay?
Complete and submityour return anyway and, where possible, make whatever payment they can with the return.
Contact HMRC on 0845 302 1435 (Business Payment Support Service) or 0845 010 9000 (General Advice Line) to explain that the return has been submitted (with part payment where appropriate) and ask about the possibility of negotiating a Time To Pay (TTP) arrangement.
Explain the circumstances why you are unable to make full payment and what steps they have taken to find funding to meet the debt. They will also be expected to make a proposal of the timescale over which they will meet the full liability taking into account that any TTP arrangement will only be entertained on the condition that future returns are submitted and paid in full by the due date.
HMRC’s agreement to a TTP arrangement is by no means guaranteed so they will need to be prepared to put forward a justifiable case for further deferral of payments.
Failure to submit a return or pay in full by the due date can result in a Default Surcharge ranging from 2% to 15% of the unpaid tax. However, worryingly in certain circumstances, HMRC might look to impose Civil Evasion Penalties.
Share and Enjoy
All VAT registered businesses will be required to send their VAT returns online and settle their balances electronically for all accounting periods beginning on or after 1 April 2012. Currently only newly registered businesses and those with a turnover of more than £100,000 are required to.
What does this mean for you if you currently file a paper return?
You either need to register with HMRC to file your VAT return online or speak to your accountant re them doing it for you. Do this sooner rather than later to ensure that you get your log-in and passwords sent through in time.
Filing online (once you get the hang of it) is quicker, more accurate and reliable (you get a confirmation that you have submitted your return!)
Paying electronically gives you an extra seven days to pay – payment is due one month and seven days after the end of your VAT quarter, e.g. payment for the VAT quarter ended 31 January is due on 7th March if paid electronically, compared to 28 February if paid by cheque.
Other things to think about
Are you on the most appropriate VAT scheme. A lot of smaller businesses could benefit from using the flat rate scheme.
If your VAT taxable turnover is less than £150,000, you could simplify your VAT accounting (and maybe get a bit of money in your pocket) by calculating your VAT payments as a percentage of your total VAT-inclusive turnover.
The percentage that you apply to your VAT inclusive turnover depends upon your type of business, examples of the percentage to apply include 14.5% for IT consultancy, 11% for photography, 8.5% for printing, make sure you use the correct rate for your business.
Advantages of the scheme
- The Flat Rate Scheme can reduce the time that you need to spend on accounting for and working out your VAT. Even though you still need to show a VAT amount on each sales invoice, you don’t need to record how much VAT you charge on every sale in your accounts.
- You may end up oweing HMRC less VAT than if you calculated your return using the traditional method.
- There is a first year discount of 1% to attract you to the scheme. It may be worth entering the scheme for the first year to take advantage of this and then returning to the normal scheme at the end of this.
- Certainty over the amount of VAT that you owe. If you keep a track of your VAT inclusive sales, the amount of VAT that you owe is simply your percentage x the sales.
- Peace of mind that you have completed your VAT return correctly.
Disadvantages of the scheme
- May not be in your favour if you mostly buy standard rated items, are normally due a refund, or if a high proportion of your sales are zero rated or VAT exempt.
You must apply to HMRC to use the scheme. You can do this by completing a simple online form.
Share and Enjoy
- What is the most tax efficient remuneration strategy for directors of owner managed limited companies in the 2013/2014 tax year?
- jla accounting and The Inspire Network in the news
- Payroll and RTI (Real Time Information)
- HMRC to target outstanding VAT returns and payments
- HMRC Penalty Regime for Self Assessment
- Christmas Gifts – The Tax Implications
- The Inspire Network
- Cloud accounting – is it the way forward?
- What is the most tax efficient remuneration strategy for directors of owner managed limited companies in the 2012/2013 tax year?
- NIC holiday for start up companies