VAT is value added tax
which can be viewed as a tax on consumer spending and goods imported into
the United Kingdom (UK). It can also be examined as a consumption tax
based on value added to goods and services.
Deadlines
The deadlines for
submitting VAT is dependent on the deadline shown on your VAT return. There are
two different deadlines for submitting your VAT payments, the most common type of VAT
is paid 4 times a year it is called VAT MOSS scheme and the other is the
VAT annual accounting scheme.
Under the VAT MOSS scheme, businesses
need to pay quarterly if the dates
happen to be on a weekend or a bank holiday business are
required to pay the preceding working day.
These dates are:
20 April
for the quarter finishing 31 March
20 July
for the quarter finishing 30 June
20
October for the quarter finishing 30 September
20
January for the quarter finishing 31 December
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The VAT annual accounting scheme is a scheme where you pay once a year
and the deadline for payment is 2 months from the last day of your
accounting period. Under this scheme your predicted VAT taxable revenue or turnover needs
to be £1.35 million or less, which
makes it an option an advantage for small business owners. Under this
scheme businesses can make early VAT payments towards their bill, the
amount businesses pay is contingent upon their previous return or it
is predicted for business that is new to VAT.
Every year only one VAT return is submitted. After submitting their
VAT return businesses, can either make a last payment which can be the distinction between their advance or early
payments and their definite VAT bill. Business can also file an
application for a refund, if they have overpaid on their VAT payment.
Penalties and
Surcharges
Penalties occur when HMRC
put a default next to the business account. Defaults are recorded when HMRC
does not receive a business's VAT return by the date of the deadline or when
the complete payment for VAT has not entered HMRC's account by the deadline.
HMRC can charge a business
up to a 100% for a penalty. The first penalty is for £400 if a business submits
a paper VAT return unless told otherwise by a HMRC that an online copy is
required.
The second penalty is 30%
of an assessment which is sent by HMRC which might be low and the business does
not tell them it is incorrect within 30 days. An assessment is an estimation
given by HMRC of what they think a business owe's them, this is only sent to
businesses that have not sent their VAT Return and not paid any VAT
that is due on time.
The third
penalty is 100% of any under estimated or over estimated VAT claimed if
businesses send a return that includes careless or purposeful errors.
Surcharges
A
business can go into a 12 month 'surcharge period' if they
default. HMRC will write a letter to a business that defaults describing
if they owe any surcharges and what will occur if they were to default again.
Defaulting again within this time period could result in the one an addition 12
month extension. Furthermore businesses might have to
paid an additional amount including the VAT they already owe.
The
amount the business pays depends on the surcharge percentage on the VAT unpaid
on the deadline date for that accounting year which is the default.
As seen in the table below the surcharge increases month
on month every time the business defaults in the surcharge period. Business can
rest easy because they are not charged for their first default.
Table:
how much businesses are to be charged
Defaults in
between 12 months
|
Surcharge if
annual revenue is less than £150,000
|
Surcharge if
annual revenue is more than or is £150,000
|
2nd
|
No surcharge
|
2% (there should be no surcharge if it is
below £400)
|
3rd
|
2% (there should be no surcharge if it is
below £400)
|
5% (there should be no surcharge if it is
below £400)
|
4th
|
5% (there should be no surcharge if it is
below £400)
|
10% or £30 (depends on which one is
higher)
|
5th
|
10% or £30 (depends on which one is
higher)
|
15% or £30 (depends on which one is
higher)
|
6 months or more
|
15% or £30 (depends on which one is
higher)
|
10% or £30 (depends on which one is
higher)
|
However, exceptions to the
surcharge are made if businesses submit their VAT return after the deadline
such as; full payment by the due date, have to pay no tax and are due a VAT
repayment.
How to avoid penalties
It is in the interest of all business owners to pay their VAT on time in
order to avoid penalties. By paying on time and having excellent records
are good and effective ways to avoid paying penalties.
At Taj accountants we understand how HMRC penalties work, which in return helps us provide an efficient and effective service to our clients. Our Authorisation as an agent, allows HMRC to deal with us on behalf of our clients. As Advisors at Taj Accountants, we feel all our actions and commitments are geared towards helping you avoid penalties and problems.
We believe we provide our clients with adequate and reliable
information on how the system works. This includes looking into our clients'
record keeping arrangements and processes to see whether or not they are
adequate enough to produce accurate returns.
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Published on: 09/02/2017
Disclaimer: The information provided in this blog is brought to you by Taj Accountants. As you are reading this blog of your own free will, any information taken from this blog is at your risk. Before using the information provided to apply, to your business seek professional or legal advice. Taj accountants will not be liable for any damages.
Published on: 09/02/2017
Disclaimer: The information provided in this blog is brought to you by Taj Accountants. As you are reading this blog of your own free will, any information taken from this blog is at your risk. Before using the information provided to apply, to your business seek professional or legal advice. Taj accountants will not be liable for any damages.
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