Rights Tax law

VAT Tips For Avoiding Surcharge

You are required to submit a VAT Return every 3 months even if you don’t have any VAT to reclaim or pay. It is highly likely that you have received a reminder that your VAT return us due soon. If you have not, you should not consider this a ‘Get out of jail free’ card. Instead, you need to ask yourself whether you are aware of the grave implications of filing your VAT return late.

vat tips

If you are a small business and don’t have an accountant to file the return for you, you can easily miss the VAT deadline. Considering that there are numerous other things going on when running your business, the VAT return us probably one of the last things on your mind. Missing the VAT deadlines does have implications.

How Do I Know Whether I Charge VAT?

If the VAT taxable turnover of your business is over £82,000, then you are required to register for VAT. If it below this amount, you can also register voluntarily too.

From the registration date you must:

  • Charge customers the appropriate VAT amount
  • Pay any VAT due to the government
  • Submit your VAT Returns
  • Keep a VAT account and VAT record

How Much VAT Will I Be Required to Pay?

You will be required to pay the difference between your input VAT and your output VAT.

Output VAT refers to the VAT that you calculate and charge on the goods and services you sell.

Input VAT refers to the VAT suppliers charge you when you buy goods or services from them.

If you use an accounting system, this will usually be calculated for you.

What Will Happen If I Miss the VAT Return Deadline?

If you ever miss the VAT Return deadline or don’t pay the entire amount due on the return, a default will be recorded. In case you default, you will enter a ‘surcharge period’ of 12 months. The government will write to you detailing all the surcharges you owe and the actions to be taken should you default again. It does not make a difference as to the length of the delay, reasons for the delay, or even the size of your business.

How Are VAT Surcharges Calculated?

The surcharge is a percentage of the VAT owed, which can be as high as 15 percent. The least amount of surcharge you can pay at the 10 percent or 15 percent rates is £30.

Exceptions to the surcharges are provided. For instance, you won’t have to pay any surcharge if you:

  • Don’t have any tax to pay
  • Pay your VAT in full before the due date
  • You are due a VAT repayment

Still, it is hard to disagree that the cost would be massive if you fail to file your VAT return on time. Besides these charges, you may also get a penalty of up to £400 should you submit a paper VAT Return unless the authorities have informed you of being exempted from submitting online returns.

VAT Surcharge Notice

You will receive a Surcharge Liability Notice the first time you don’t pay or submit your return on time and default. The notice lasts for 12 months. In case you default again during this period, you will receive a Surcharge Liability Notice Extension that extends the period for an additional 12 months and so on.

VAT Surcharge Appeal

If you don’t agree with the decision that you are liable to pay a surcharge or the amount you have been calculated, you can request the authorities to review your case.

If you wish to appeal your surcharge, you will be required to write to the government within 30 days of the date the notice was sent to you, providing reasons why you don’t agree with the decision. You can also use an advisor or accountant to do this for you.

You may wish to appeal the surcharge for the following reasons:

  • You think that your excuse for the default is reasonable
  • You think that there are exceptional circumstances, which means that the default ought to be removed
  • You think the government used the wrong amount of VAT when calculating the surcharge amount
  • You think the government applied the wrong surcharge rate

How Can I Find Out When My VAT Return Is Due?

Just check your VAT account online to find your deadline. It will tell you exactly when your returns are due as well as the date the payment must reach the government’s account. Keep in mind that you must allow time for your payment to reach the government, which is why you must always try to get your VAT Return in as early as you can.