VAT

News Item: Still think you don’t need a VAT Healthcheck?

Think again.

HM Revenue and Customs (HMRC) new penalty regime comes into force for VAT returns due to be submitted on or after 1 April 2009, so for any business which submits returns on the normal quarterly basis the return for the period ended 31 March 2009 and all subsequent returns will come within this.

 

 

 


So what? Well, the maximum penalty for misdeclarations is increased from the current 15% to 100%! Out goes the repeated and serious misdeclaration penalty to be replaced by just one – the rate of which is fixed by statute.

 

Just how bad could this be? Well, let’s say you make a mistake and reclaim the VAT incurred on the purchase of a new car that will be used privately (and which you ought to block). If you miss this, fail to correct the error using the new Error Notification procedures (previously called Voluntary Disclosure) and HM Customs find the error on a routine VAT review visit they may take the view that:

 

(a)     your systems are inadequate so you did not take reasonable care; and

(b)     the error was both deliberate and concealed from them (as you did not disclose it prior to the review).

 

If this is the case the maximum penalty would be 100% of the VAT claimed! Even if you disclosed the error on the day of the visit before HMRC found it the penalty could only be reduced down to a minimum of 30%.

 

There are several ways however to protect yourself from incurring the penalty, some of these are:

 

(1)     to have robust systems in place to check VAT returns prior to submission;

(2)     to give your staff clear instructions on the preparation of returns – or to leave yourself notes clearly visible in the VAT file for example, on what input tax may never be claimed;

(3)     to check with us and to note the date of the phone call as well as the question asked and answer given (I do this as a matter of routine);

(4)     to ask us to conduct a VAT Healthcheck.

 


Should you be interested in having a VAT Healthcheck please contact Andrew Stephenson on 01254 688100 or by email at a.stephenson@pierce.co.uk