September 19, 2020

Fun Uploads

—— Unlimited Fun ——

Mistakes Related to VAT & their penalties that business make

Death and taxes are unavoidable with the only difference being that taxes have to be dealt with every year. From a roadside Pizza seller to the big corporates, paying their taxes is common amongst all. And like every other country around the world, the UK also has a set of tax filing rules and regulations that must be followed in order to keep you out of any legal trouble. 

Being a business owner isn’t easy which is why many of them are using virtual accounting services to get their tax done from professionals instead of doing themselves. The HM Revenue and Customs(HMRC) is very strict about the VAT and any mistakes or discrepancies be it intentionally or unintentionally can result in you being penalized by them. However, business owners can opt for vat outsourcing services to get their job done professionally.

So, here we will be discussing some of the common VAT mistakes that can result in you or your business being penalised.

Common VAT Mistakes

  1. Recording and reporting errors:

Small business owners usually ignore the importance of seeking professional help by ignoring business accounting services and at times consider being their own expert Accountants. But this can have serious repercussions. While business owners aren’t professionals in Accounting, there are many instances when they can either record and report VAT Returns wrong. Some common cases maybe:

  • Failure to record VAT in accordance with their tax bracket
  • Filing false reclaims
  • Calculation errors
  • Claiming VAT without purchase invoices
  • Missing sales while filing return
  • Filling duplicated invoices
  • Confusing net figures with gross

While these errors can be rectified by paying the mismatching amount in the next return, there may be penalties in case of larger errors. Such penalties can be as high as 70% if done intentionally. However, you can avoid such huge penalties if you go and report to the HMRC about the discrepancies yourself. Again I would like to refer that using outsourced bookkeeping services are a great way to avoid penalties and they aren’t costly instead penalties can cost you more.

So be wise and let business accounting services take over your VAT troubles/

  1. Failure to pay VAT or submit VAT returns on time:

Keeping up with the tax deadline is very important if you are to avoid the HMRC from penalising you. For business owners who prefer doing their books on their own, the tax season can be a hassle. Recording, reporting, keeping up with compliances, getting books organised can be a real pain. And this can result in late filing of VAT returns which again can be penalised according to the HMRC rules and regulations. However, it is pretty easy to keep up with the deadline if you are wise enough to seek help from outsourced bookkeeping services that can maintain your books on a regular basis and ease down the tax season hassle.

Penalties:

Here the rate of penalty that the HMRC can charge in cases of missing VAT return or failure to keep up with the deadline:

  • In case there are overstated or understated VAT filling from your end that seem to be intentional or deliberate, HMRC can charge 100% penalty
  • In case you do not inform the HMRC about any mistakes or discrepancies in the VAT filing that are low, HMRC can charge 30% of an assessment 
  • If you aren’t filing VAT online instead filing it via paper, HMRC can charge you with a penalty of £400 

Conclusion:

Earning and paying taxes accordingly is a never-ending cycle and as a responsible citizen, every earning individual should pay his/her tax on time. Same goes with VAT Returns wherein you have to report your VAT due on, total sales and purchases made, VAT to be reclaimed and refunded, every 3 months.

So why take the unnecessary risk, instead choose VAT outsourcing services that can help you keep up with the HMRC rules and regulations. Moreover, in today’s digital world, everything can be done online. You don’t need to hire an in-house team, virtual accounting services can do the job successfully for you.

5/5 (1 Review)