If your company’s taxable goods and services sales in the UK surpass the VAT registration threshold, it is legally compelled to register for VAT and file regular VAT reports to HMRC. Even if they fall below the mandatory threshold, many businesses voluntarily register in order to recuperate VAT paid on expenses.
In this comprehensive tutorial, we’ll look at VAT registration requirements and rules in the United Kingdom, who must submit VAT returns, filing procedures and deadlines, various schemes, and the repercussions of VAT non-compliance. Continue reading for a comprehensive understanding of UK VAT compliance.
What Exactly Are VAT Returns?
Filing a VAT return requires filing a report summarising the total VAT received from sales as well as the VAT paid on company purchases during the reporting period. This must be reconciled with financial data. The net VAT owed or refundable is then determined.
Returns must be meticulously prepared and sent on time, based on accompanying sales documents. HMRC may levy penalty for late filing. VAT returns help to ensure that the VAT liability for goods and services provided in the UK is met.
Who Is Required to Submit VAT Returns?
Any UK business that has made more than £85,000 in VAT taxable sales in the previous 12 months must register for VAT and file returns. Non-profit organisations and charities are included if their yearly taxable trading income exceeds the threshold. Some businesses voluntarily register for VAT below the threshold in order to recoup VAT on expenses.
If you are unsure if your company’s turnover necessitates obligatory VAT registration, properly review the VAT Registration instructions available on gov.uk. As you approach the £85,000 limit, use the VAT thresholds calculator to estimate taxable sales cautiously. If your totals exceed the mandatory threshold, make sure you register on time to avoid penalties.
VAT Return Deadlines in the United Kingdom
For established UK enterprises, the standard VAT return filing frequency is quarterly. This means that VAT must be computed and paid separately for each quarter (Q1 covering January-March, Q2 covering April-June, etc.), then reported and paid to HMRC.
The deadline for quarterly VAT returns is one month and seven days following the end of each period. The deadline for periods ending in March is May 7th. If you file monthly or annually, the deadlines are different.
Steps to Completing VAT Returns on Time
To effectively complete and file periodic VAT returns, use this standard procedure:
Maintain detailed sales and purchase records, including invoices and receipts for all transactions reported. Keep this information for future HMRC audits.
Calculate the total VAT collected from goods and services sales over the period. Reconcile this with bookkeeping records because the outputs must match.
Total VAT paid to suppliers and HMRC on company expenses is calculated. Confirm that this corresponds to invoices as inputs.
Subtract total VAT input claims from total VAT outputs to get the net amount owing to HMRC or potential refund.
To submit statistics online by the deadline, use HMRC’s free software. Accounting software, on the other hand, can automate filing.
To avoid delays in obtaining refunds, thoroughly review the completed return before sending it.
To avoid late payment penalties, pay any net VAT payable by the due date after filing.
Consequences of Non-Compliance with VAT Returns
To avoid HMRC enforcement proceedings and fines, registered firms must file complete and accurate VAT returns on time. Penalties and dangers associated with noncompliance include:
Automatic initial late filing penalties of up to £400 are imposed, with further fines levied for persistent late submissions.
Late payment of liabilities may result in surcharges of up to 15% of the VAT amount owing. This is in addition to the tax debt.
HMRC issues VAT assessments arbitrarily for failure to file, resulting in anticipated tax amounts that frequently require appeal.
Increased likelihood of HMRC conducting detailed VAT inspections and thorough tax audits, with errors resulting in large backdated tax bills and significant fines.
Refunds will be delayed until filing and payment compliance issues are resolved.
HMRC may eventually de-register you for persistent gross non-compliance, however any tax owed will still be sought.
VAT Return Assistance Can Help You Avoid Penalties
Certain VAT schemes, such as Flat Rate and Cash Accounting, might make compliance easier for smaller enterprises. Professional assistance is essential, however, to guarantee full compliance and exposure is minimised.
Inadequate accounting resources or knowledge should not prevent you from satisfying your necessary VAT return UK filing and payment responsibilities, which entail severe penalties if not met. Allow an expert to handle filings, payments, and ideas for legally minimising VAT owing. By utilising assistance, you may stay compliant and concentrate on business success.