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Changes to HMRC penalties for late VAT return submission; How to prevent late submission

27th May 2022
Brought to you by
ANNA Money
ANNA (Absolutely No-Nonsense Admin) is a business current account and business admin app that helps...
Share this content

ANNA Money can help your clients keep on top of business records, and better bookkeeping means a lower risk of penalties.

How to help your clients avoid VAT Penalties | ANNA Money | image of penalty notices

Bookkeeping can be a painful task for some business owners, but it has a vital role to play. Keeping records of business costs and sales is the key component in managing cashflow, identifying profitability and in the preparation of tax returns that need to be regularly submitted.

Even if they know that it's important to keep records, are clients aware of the ways they could do things more efficiently?  

Their records need to be organised, they need to balance and they need to be done in good time so that an Accountant can review, calculate and adjust tax returns, to make sure they don’t miss their respective deadlines. 

But could this be improved, for better efficiency and prevention of late submission of tax?

Changes to HMRC penalties for late VAT return submission

With the new changes to VAT return penalties that HMRC will be introducing in January 2023, it becomes all the more important for businesses to have their records organised well enough so the focus of any business admin is their tax reporting obligations and not bookkeeping management.

New government guidance published in May 2022 explains that VAT penalties and interest charges issued after January 2023 will work on a points-based system. 

For each late VAT return submitted, a late penalty submission point will be issued to the business. 

Once a business has exceeded the limit of points, a £200 penalty charge will be issued. After this, another £200 penalty charge will be issued for each subsequent VAT return submitted late.  

How can we prevent late submission?

So how can Accountants ensure they manage their clients effectively to ensure they are not hit with points and fines? 

The key is quality business administration. 

If your clients are handing over their records in good time, with accuracy in their bookkeeping and everything balancing, then the messy job for you is done. 

How can ANNA Money help accountants?

ANNA Money is designed in a way that it supports accountants in managing their cash basis clients' bookkeeping and business admin. It can improve efficiency by automated bookkeeping through a categorisation process of business transactions that are fed through from a client’s business current account. 

A client can either; open a business current account with ANNA or link their own chosen bank account to ANNA’s Business Tools app. The app will categorise all transactions into a source of income, or a business expense based on the information it gathers from the bank statement. It can be guided by the customer initially as well, until ANNA learns more about the type of transactions that this business incurs. 

The client can add a digital copy of their transactions, with the app automatically matching the source document without manual intervention to the transaction in the books. 

When coming to an Accountant’s review, all records are organised, with the supporting documents embedded into the report alongside the transactions. The accountant can have their own access to the account for review in their own time. 

As well as this, ANNA lets the client produce invoices, which can be sent to the client and once it has been paid, it will be automatically matched and show up clearly in the report with its supporting documentation alongside it.

As ANNA offers expense and income categorisation, it becomes a much easier task to prepare the VAT return for a client, ANNA takes care of this for you. ANNA’s categorisation tool is always up to date with the latest VAT rules, so it is only possible for a transaction to be allocated to its relative box in the VAT return, if the category selected deems it correct to do so. 

For example, the business entertainment category will only allocate the net value of an expense to box 7 of the VAT return and exclude the VAT amount from box 4 of the VAT return, based on the VAT rules that input tax on business entertainment is blocked as stated in VAT notice 700/65.  

ANNA is MTD compatible, so the user has the option to submit it directly from the app to HMRC. 

The only thing left is for the Accountant to review, finalise and manually adjust any boxes of the VAT return if necessary, using ANNA’s manual adjustment feature. 

Bookkeeping will take as long as it takes. But the reality is, the more transactions generated for a business, the more time bookkeeping will take. So, if a company is growing and looking to increase their revenue this financial year, it is in their interests to ensure business administration does not hold them back.

With a focus on the efficiency of bookkeeping for businesses, Accountants can support their clients to be better at business admin and prevent late submission of their VAT returns to HMRC. 

Not only will a client get better at bookkeeping, but Accountants can manage their workload far more effectively. 

Find out more about how ANNA can help accountants and their clients today.