Overdue VAT returns

Overdue VAT returns

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My new client, a local grocery shop, has not filed VAT returns since mid 2013.

He now has 4 outstanding quarterly Returns to file to be up to date with his VAT affairs.

He sometimes pays and sometimes reclaims VAT. Amounts are usually <£1200 either way (depends on quantity of zero rated sold). 

Because of his incapability of managing the VAT himself so far, he's currently within a surcharge period (seems like he is deeply in it, as the % is %15)

1. I know that you can avoid some Companies House fines by filing the overdue accounts and the following year's accounts at once.

Is there any similar trick for VAT? does it matter, for good or worse, whether 4 Returns are filed at once or each is treated individually anyway?

2. HMRC have assumed his Return for outstanding qtrs 1&2 to be small refunds.

Say it turns out to be an incorrect assumption, can their decision change? or once they determine the liability (a refund in this case), even the actual Return can't revers it?

Replies (6)

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chips_at_mattersey
By Les Howard
21st Jul 2014 20:51

Grocer VAT

Get the Returns submitted and paid asap. There is no benefit in submitting them individually.

The only way to correct HMRC's estimates is by submitting Returns. Also, a failure to notify an under-assessment also triggers a penalty.

You can challenge penalties under 'reasonable excuse' provisions. 

You might also consider Annual Accounting, or the Flat Rate Scheme, if he is eligible.

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By Minnie136
21st Jul 2014 22:02

Not the flat rate scheme

Les - why would you advise the FRS if he has a high number of zero-rated supplies and frequently obtains a VAT refund?  Thanks

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Replying to codling:
chips_at_mattersey
By Les Howard
22nd Jul 2014 12:43

FRS?

I would simply consider it, and do an arithmetic check, to make sure it was worth doing. It would also provide some simplification.

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By DMGbus
21st Jul 2014 22:31

Refund returns = no penaltes

Any returns showing refunds due that are late filed will carry NO penalties.

As already advised there's no alternative but to get all returns upto date, no choosing which ones to file or not.  ALL MISSING RETURNS MUST BE FILED.   I would normally file all missing returns in one go.

The filed returns will displace assessments.

The penalties will be revised to %ages of VAT liable.

Use client's Government Gateway and ID to monitor the VAT liability as shown online.

 

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Stepurhan
By stepurhan
22nd Jul 2014 13:00

No offset in penalty calcs

Be aware that the penalty for each return will be decided based on that return. So no penalties for refund returns, but there will be penalties on any returns where there was an amount due.

I agree FRS is unlikely to be worthwhile for someone with lots of zero rated sales. Since you will have all the necessary information from preparing the returns, you should still do a quick check anyway. It would be silly to miss out on an actual saving because of a gut feeling that was wrong.

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By DMGbus
22nd Jul 2014 13:16

Here's how offset might work / annual VAT returns

If the client was small enough to qualify for annual VAT return filing then there would be one annual liability - owing returns minus refund returns and a penalty based on the net liability.

Another benefit of annual VAT returns for this type of client is only one penalty a year (not 4). 

I suppose all that I say is academic in this case as the client's turnover (as a retailer) might be too high to qualify for annual VAT return filing, and the top penalty level (15%) has already been attained by the client.

Personally I'm not a great fan of annual VAT return filing as more often than not the client is late providing data - maybe even not writing the records up until once a year a few days before the VAT return deadline.

The VAT return deadline, by the way, for annual VAT returns is 2 months (so year to 31 March file by 31 May).

One fortunate thing in your client's circumstances: HMRC proposals to revise VAT return late filing penalties were NOT implemented.   The new regime would have levied penalties even where VAT refunds were due and be levied on a scale quite a bit higher for small businesses than the current long established scale.

 

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